Comments on Zachary Oxman's articles RSS Syndication from SeekingAlpha.com http://seekingalpha.com/author/zachary-oxman/articles http://seekingalpha.com/article/106779-isn-t-deflation-a-good-thing?source=feed#comment-310980 310980 Thu, 20 Nov 2008 13:15:35 -0500
Also, I believe it would take quite a while for the presses to print enough hard currency to actually back all the "virtual money" created by the credit bubble, even AFTER it crashes. If this is true, the amount of money being printed is but a drop in the bucket regarding real money supply. I could be off on this though.]]> http://seekingalpha.com/article/106779-isn-t-deflation-a-good-thing?source=feed#comment-310745 310745 Thu, 20 Nov 2008 09:53:41 -0500 http://seekingalpha.com/article/106779-isn-t-deflation-a-good-thing?source=feed#comment-310312 310312 Wed, 19 Nov 2008 17:32:12 -0500 http://seekingalpha.com/article/106779-isn-t-deflation-a-good-thing?source=feed#comment-310186 310186 Wed, 19 Nov 2008 15:36:27 -0500
But it appears much of the new money being created out of thin air is just to plug huge holes on balance sheets where credit (money) has evaporated. While there may be trillions of new "dollars" out there, are these dollars not actually just credits - obligations to be repaid? because that is what modern fiat money is. A credit against a debt. Much of the private debt has truly evanesced into the mist, never to be seen again. Thus fiat credit dollars have been lost forever.

Inflation is caused by huge buying pressure from below, which pushes up the cost of goods. But excess compensated rich people can do even more to push up inflation through leverage. Really rich people had so much excess money they turned it over to hedge funds, which then borrowed "out of thin air" money manufactured by the banks to leverage their rich people's contributions 10 fold or more. Then this out of thin air money was unleashed to buy up the prices of stocks, commodities, non-existent fraud mortgages etc. Basic commodities like energy got pushed up so high by this hot air money the buying pressure obviously exceeded the actual buying pressure from fast growing countries competing for post-peak oil. In turn, the consumers had to stop buying so much of a high priced commodity.

You can only deductively reason that the out of thin air inflationary dollars overpriced tangible assets from oil and steel to Brandywine Real Estate Trust and Freeport Moran and Fortress Investment Group. Because no tree grows to the sky, the puncturing of the containers holding these hot air credit dollars did indeed evaporate into thin air.

There does not seem enough hot air dollars salvaged in reserve to pump up asset classes anytime soon. That will require banks to start pumping credit dollars out of thin air again, but they are reluctant to do so.

And we will not have inflation until conjured up credit-collars are once again in the hands of the little people at the bottom of the pyramid.

A 5.8 percent payment boost for Social Security recipients is a start, a weak start, but a start toward getting money lower down on the social class structure.]]> http://seekingalpha.com/article/106779-isn-t-deflation-a-good-thing?source=feed#comment-310146 310146 Wed, 19 Nov 2008 15:06:18 -0500
It is the same today. As soon as OPEC tightens oil, the tensions caused by low oil prices in the Gulf will lead to insurrections and wars and the price of oil will shoot up again, triggering more inflation.

The US is far, far, deeper in debt this cycle. We were barely in debt during the seventies and we were hammered by high oil prices/high inflation waves that led to interest rates rising to over 12%.]]> http://seekingalpha.com/article/106779-isn-t-deflation-a-good-thing?source=feed#comment-310127 310127 Good article particularly the point about the high cost of debt in > a deflationary environment. Although interest rates are low, the > cost of debt is high due to deflation of assets as people and companies > rush to deleverage.]]> Wed, 19 Nov 2008 14:30:52 -0500
L. David

On Nov 19 08:02 AM investor88 wrote:

> Good article particularly the point about the high cost of debt in
> a deflationary environment. Although interest rates are low, the
> cost of debt is high due to deflation of assets as people and companies
> rush to deleverage.]]> http://seekingalpha.com/article/106779-isn-t-deflation-a-good-thing?source=feed#comment-310027 310027 Wed, 19 Nov 2008 12:49:29 -0500 http://seekingalpha.com/article/106779-isn-t-deflation-a-good-thing?source=feed#comment-309943 309943 Wed, 19 Nov 2008 11:49:31 -0500
Also, deflation is not bad in itself unless it is extreme. Just like mild inflation, mild deflation can be a good thing.

When prices are continually dropping, people are encourage to save to buy things in the future but they are also encouraged to buy now, especially if they (like us) have experienced inflation all of their lives.

We are used to that concept when we purchase electronic equipment: I can by a Dell Latitude for a few hundred dollars that would have cost me two thousand only five years ago. This is true for almost all goods that are dependent on technological advancements.

For people who are cash rich, deflation makes everything cheaper and that can't be a bad thing (unless you are an economist of course ;)

Bring it on!]]> http://seekingalpha.com/article/106779-isn-t-deflation-a-good-thing?source=feed#comment-309900 309900 Mild deflation is no worse than mild inflation. Markets can > adjust their expectations. I suspect "markets" may adjust but people, especially the poor, may have less flexibility. Have I misunderstood the history of the 1930's? - surely, even "mild" expectation of deflation was an intractable and chronic economic condition, more corrosive than inflation expectations? > It should be apparent in the next couple of year what assets will > be the primary bubble market. I envy your clarity, and would welcome any concrete recommendations? ]]> Wed, 19 Nov 2008 11:24:18 -0500
> Mild deflation is no worse than mild inflation. Markets can
> adjust their expectations.
I suspect "markets" may adjust but people, especially the poor, may have less flexibility.
Have I misunderstood the history of the 1930's? - surely, even "mild" expectation of deflation was an intractable and chronic economic condition, more corrosive than inflation expectations?

> It should be apparent in the next couple of year what assets will
> be the primary bubble market.

I envy your clarity, and would welcome any concrete recommendations?
]]> http://seekingalpha.com/article/106779-isn-t-deflation-a-good-thing?source=feed#comment-309856 309856 Wed, 19 Nov 2008 10:49:07 -0500
The sad fact is that a massive deflation is possible, only because of the massive inflation that distorted markets, incentives and expectations. The fiscal and monetary authorities ar taking steps right now to ensure that we will have another massive inflation, tremendous credit and asset bubble and an even worse collapse not too many years into the future.

It should be apparent in the next couple of year what assets will be the primary bubble market.]]> http://seekingalpha.com/article/106779-isn-t-deflation-a-good-thing?source=feed#comment-309776 309776 Wed, 19 Nov 2008 09:42:47 -0500 This is BAD.
Disinflation is when prices fall, though nominal growth may remain positive. This situation may occur, but is far too close to deflation for comfort.

Worry about excess money when the worst of evils, deflation, is gone.]]> http://seekingalpha.com/article/106779-isn-t-deflation-a-good-thing?source=feed#comment-309740 309740 Wed, 19 Nov 2008 09:18:09 -0500
As we know from our economic history, it is politically difficult to sop up all this excess money. With the House of Representatives incumbents running every two years they (a good reason for Congressional Term Limits) put tremendous pressure on the "Central Bank" (which is supposed to be independent and fifty years would have opposed the moniker) to keep the spickets of monetary supply flowing.

It is inflation we must concern ourselves with. Deflation is self correction unless our Administration makes the mistakes of FDR by exacerbating the problems by destroying incentive and then only bailed out by Hitler's invasion of Poland, contrary to what the historical revisonists say.]]> http://seekingalpha.com/article/106779-isn-t-deflation-a-good-thing?source=feed#comment-309736 309736 Wed, 19 Nov 2008 09:15:02 -0500 Everything is tied to the price of oil because it is used in producing all goods and services. The price of oil is very fragile because it is based on such a small gap between supply and demand so in the future we will continually experience the current type cycle we are going through. High oil prices=recession, low oil prices=recovery and on and on.
As investors we will just have to be smart enough to get out before the peak and get back in close to the bottom (like now).
]]> http://seekingalpha.com/article/106779-isn-t-deflation-a-good-thing?source=feed#comment-309713 309713 Wed, 19 Nov 2008 08:58:03 -0500 http://seekingalpha.com/article/106779-isn-t-deflation-a-good-thing?source=feed#comment-309649 309649 Wed, 19 Nov 2008 08:02:26 -0500 http://seekingalpha.com/article/106019-the-bank-of-uncle-sam?source=feed#comment-306601 306601 Sat, 15 Nov 2008 07:38:00 -0500 http://seekingalpha.com/article/106019-the-bank-of-uncle-sam?source=feed#comment-306490 306490 Fri, 14 Nov 2008 21:48:56 -0500 http://seekingalpha.com/article/106019-the-bank-of-uncle-sam?source=feed#comment-306374 306374 Fri, 14 Nov 2008 16:39:07 -0500 http://seekingalpha.com/article/106019-the-bank-of-uncle-sam?source=feed#comment-306093 306093 Fri, 14 Nov 2008 11:23:47 -0500 http://seekingalpha.com/article/106019-the-bank-of-uncle-sam?source=feed#comment-305968 305968 Fri, 14 Nov 2008 09:39:36 -0500
Maybe the truth is that the lines are much shorter than in the past because most consumer borrowing was probably done via home equity lines of credit, which have since dried up due to negative equity on the home.

The FED, USTreasury, President, and the lame-stream media can blather on all they want about banks needing to loan but it won't help. As Keynes noted, "You can't push a string."

The consumer class is tapped out. What other reason makes even a tiny bit of sense in explaining the huge rise in credit card debt?

The chronic "spend beyond my income" folks have no other source for the 'beyond my income' portion available to them. They are grasping at 21+% annual interest rates to support their lifestyle, while it lasts.

When the credit card companies eventually shut down their cards they will go bust and we will see another wave of losses in the lending industry and another drop in consumer spending.

Unless and until the crazy 'borrow to spend' merry-go-round stops, the recession will continue. Only then will the country begin to build a base of savings to support productive activities and put the economy in forward motion.

Any and all efforts by the gub'mint to keep the merry-go-round spinning will only bring us that much closer to hyperinflation.]]> http://seekingalpha.com/article/106019-the-bank-of-uncle-sam?source=feed#comment-305869 305869 Fri, 14 Nov 2008 08:07:17 -0500
]]> http://seekingalpha.com/article/106019-the-bank-of-uncle-sam?source=feed#comment-305815 305815 Fri, 14 Nov 2008 06:08:46 -0500