View Single Post
Old 12-11-2014, 04:36 AM
Danny B Danny B is online now
Platinum Member
Join Date: Oct 2012
Location: L.A. Ca.
Posts: 4,886
Fighting the deflation war

The bankers and GOV are hard at work to prevent deflation. They are SERIOUSLY afraid of a default. In a default, the bankers stand to lose a lot. If they can cause hyperinflation, the loss is spread to everyone who holds U.S. money or debt notes. Here are a couple of headlines on the deflation / inflation battle.
"Deflation Is Winning
And central banks are running scared"
Deflation Is Winning: Brian Pretty - | Peak Prosperity
"Major central banks will together add almost three times more liquidity next year than they did in 2014, according to Credit Suisse Group AG analysts. "
Think Central Banks Are Done? Stimulus to Accelerate in 2015 - Bloomberg
This is an interesting battle. The FED has created something like $ 26 trillion. But, they were only able to inject it into the upper loop of the economy. The BOJ has injected a very respectable amount also. If the CBs continue to pump liquidity in to the stock market, they may get only stagflation because wages will never rise. The question is; can the feds buoy the stock market eternally?
"So many of the exact same patterns that we witnessed leading up to the financial crash of 2008 are happening again.

I have written more than 1,200 articles about the economy on my website since 2009, and right now our financial system is more primed for a crash than at any other time since I started The Economic Collapse Blog."
Not Just Oil: Guess What Happened The Last Time Commodity Prices Crashed Like This?...
OK, so we have had a "Hindenburg Omen" and a return to the 2008 conditions. Some aspects of the economy are about 5 times worse now that the weeks previous to the 2008 crash.
Just how long can the upper loop of the economy remain independent of the lower loop? How long can the upper loop continue to inflate while the lower loop is deflating? I don't have a thorough understanding of this but, I believe that leverage is the key.
If I buy something with paper dollars, they will never disappear. if I make a digital investment ( bet) with just 4% placed to secure my bet, no paper money is involved. If the debt goes bad, I get a call to make good on the bet. I have to pay up with real paper money. Digital ( prospective) money evaporated and had to be replaced with real paper money. This is deflationary. There are supposed to be 10 Quadrillion worth of contracts denominated in dollars. People spend or don't spend based on the notional value of the assets that they hold.
If the market crashes, money isn't so much destroyed as much as notional value is destroyed. The FED can pump money into stocks to resurrect the notional value that was lost in the crash. The FED can't very well pump money into commodities because the increased price will just cut back on consumption.
Oil and commodities are falling in price now and this is vaporizing hundreds of $ billions of investor money. This is deflationary. The CBs plan to pump in trillions of new currency units.
Europe complains that it has screaming deflation. If you look at the monetary base, it has risen sharply.
The CBs can create money but, they have little control where it goes. The FED is creating about $ 3 billion a day but, it isn't actually doing any good.
Since digital money is far more subject to vaporization, through the reversal of leverage, it is far more difficult to get it to actually "stay" in the economy.
That is why the CR proposed the idea of sending everyone a check for ?$ 25,000. This is an admission that they can't create inflation with the tools that they are using now.
Reply With Quote