Comments on: The Gaping Hole in the Deflation Argument, Part II http://www.theundergroundinvestor.com/2009/04/the-gaping-hole-in-the-deflation-argument-part-ii/ The definitive investment blog for investment news not discussed in the mainstream media Tue, 07 Feb 2012 23:27:01 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: steve from virginia http://www.theundergroundinvestor.com/2009/04/the-gaping-hole-in-the-deflation-argument-part-ii/comment-page-1/#comment-45527 steve from virginia Sun, 07 Jun 2009 07:23:43 +0000 http://www.theundergroundinvestor.com/?p=913#comment-45527 It's probably safe to assume (if it ever is) that there is little fractional reserve borrowing taking place. Collateral values are nosediving and the means to repay debt are constrained. Multiple millions of unemployed mitigate against any inflation. The shift from base money to money supply creates (a little) velocity but there is more in equities and crude oil. One is irrelevant and the other asset inflation bubble in crude turns out to be highly deflationary. People buy energy (Jim Hamilton) but cut out other purchases. Basically, there is no wage component to the inflation spiral. There is also a lot more deleveraging to take place. What passes for incipient inflation is dollar deterioration, the next 'crisis' will cause a rush back too ?$$$ for safety's sake and the argument can begin all over again. Oh yeah, the bond market would not tolerate inflation; 11% 10 year and the government's days of stimulus are fin. It’s probably safe to assume (if it ever is) that there is little fractional reserve borrowing taking place. Collateral values are nosediving and the means to repay debt are constrained. Multiple millions of unemployed mitigate against any inflation.

The shift from base money to money supply creates (a little) velocity but there is more in equities and crude oil. One is irrelevant and the other asset inflation bubble in crude turns out to be highly deflationary. People buy energy (Jim Hamilton) but cut out other purchases.

Basically, there is no wage component to the inflation spiral. There is also a lot more deleveraging to take place. What passes for incipient inflation is dollar deterioration, the next ‘crisis’ will cause a rush back too ?$$$ for safety’s sake and the argument can begin all over again.

Oh yeah, the bond market would not tolerate inflation; 11% 10 year and the government’s days of stimulus are fin.

]]> By: J.S. http://www.theundergroundinvestor.com/2009/04/the-gaping-hole-in-the-deflation-argument-part-ii/comment-page-1/#comment-45455 J.S. Mon, 27 Apr 2009 02:04:17 +0000 http://www.theundergroundinvestor.com/?p=913#comment-45455 PS Austin, you should visit this forum that re-prints my blog article and re-post your above comment here http://seekingalpha.com/article/133146-gaping-hole-in-the-deflation-argument-part-ii as I believe your comment has a lot to contribute to the debate there. Best, JS PS

Austin, you should visit this forum that re-prints my blog article
and re-post your above comment here

http://seekingalpha.com/article/133146-gaping-hole-in-the-deflation-argument-part-ii

as I believe your comment has a lot to contribute to the debate there.

Best,

JS

]]> By: J.S. http://www.theundergroundinvestor.com/2009/04/the-gaping-hole-in-the-deflation-argument-part-ii/comment-page-1/#comment-45454 J.S. Mon, 27 Apr 2009 02:00:03 +0000 http://www.theundergroundinvestor.com/?p=913#comment-45454 Austin, Extremely astute analysis on your end. As I'm sure you are well aware, Fed Reserve Chairman Ben Bernanke has stated on multiple occasions that given the enormous debtor status of the US, significant inflation of the US dollar benefits the US (not the citizens obviously, but the gov't). Thanks for your input. Austin,

Extremely astute analysis on your end. As I’m sure you are well aware, Fed Reserve Chairman Ben Bernanke has stated on multiple occasions that given the enormous debtor status of the US, significant inflation of the US dollar benefits the US (not the citizens obviously, but the gov’t). Thanks for your input.

]]> By: Austin Gardiner http://www.theundergroundinvestor.com/2009/04/the-gaping-hole-in-the-deflation-argument-part-ii/comment-page-1/#comment-45452 Austin Gardiner Sun, 26 Apr 2009 19:03:19 +0000 http://www.theundergroundinvestor.com/?p=913#comment-45452 This makes me think of murder mysteries where the detective asks the question "Qui bono?" , "Who benefits?" Consider what are probably the 4 greatest monetary crises of the last 100 years. Weimar Germany hyperinflation (debtor) USA Great Depression (creditor) Japan Real Estate bubble of the 90s and beyond (creditor) US Bubble (multibubble) (debtor) Hyperinflation destroys money's value, while deflation increases money's value. Is it coincidence that the 2 crises involving creditors led to deflation and the one that has had enough time to play itself out where it was a debtor nation led to hyperinflation? Ask the question of who benefits. If you are a debtor hyperinflation destroys your debt, and deflation would magnify your debt ,if you are a creditor deflation increases the value of your credit and hyperinflation would destroy your credit. So with the US definitely a debtor, I put my money on inflation, not necessarily hyperinflation but enough to eat away at the value of the debt. This is why China is uneasy about holding so many US$. I can only think of one reasonable response from China. This makes me think of murder mysteries where the detective asks the question “Qui bono?” , “Who benefits?”
Consider what are probably the 4 greatest monetary crises of the last 100 years.
Weimar Germany hyperinflation (debtor)
USA Great Depression (creditor)
Japan Real Estate bubble of the 90s and beyond (creditor)
US Bubble (multibubble) (debtor)
Hyperinflation destroys money’s value, while deflation increases money’s value.
Is it coincidence that the 2 crises involving creditors led to deflation and the one that has had enough time to play itself out where it was a debtor nation led to hyperinflation?
Ask the question of who benefits. If you are a debtor hyperinflation destroys your debt, and deflation would magnify your debt ,if you are a creditor deflation increases the value of your credit and hyperinflation would destroy your credit.
So with the US definitely a debtor, I put my money on inflation, not necessarily hyperinflation but enough to eat away at the value of the debt. This is why China is uneasy about holding so many US$. I can only think of one reasonable response from China.

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