Deflation at Work

by: Donald Ingram

Please consider the following statistics and facts that are as up to date as possible. They are readily available to anyone that wants to do a little digging.

  1. Low consumer sentiment at 63.2.
  2. Import prices down almost 20% year over year.
  3. Consumer price index down over 2%.
  4. Retail sales are dismal, down almost 10% year over year.
  5. Imports are down almost 40% YoY.
  6. Balance of payments down almost 30% YoY.
  7. Total business inventories down over 10% and trending down.
  8. Manufacturing capacity utilization is at a 50+ year low.
  9. Non-durable goods down almost 10% YoY.
  10. Durable goods down over 20% YoY.
  11. Manufacturing output down 15% YoY.
  12. This one will grab you: reserves of depository institutions up almost 8,000%!
  13. Money supply M2 and broad money aggregate MZM are showing decreases as of week ending August 3rd.
  14. Credit is in sharp decline. It's growth is negative.
  15. Non-financial commercial paper is down nearly 25% YoY.
  16. Consumer credit is negative.
  17. Total borrowings (YoY) has plunged 75%!
  18. Monetary base velocity growth is down 75%!

Consider the above.

Now, do you still feel that inflation is at work? Yes, but you say "look at all the money that's being printed!" SO WHAT!

Money that sits in banks does nothing but sit there. Even if the banks wanted to lend, there is nobody who wants to borrow. The velocity of the vault money is ZERO! Hence very little or virtually no inflation.

Deflation is at work and it's accelerating.

Disclosure: No position held.