The money tide isn’t pushing prices up: The Federal Reserve has expanded the monetary base by 114% over the past 12 months, but Economics Editor Peter Coy argues that deflation is still a greater threat than inflation:
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
Faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof. —John Kenneth Galbraith
Retail Sales in Jan rose .4% headline m/o/m, .7% ex auto's, .6% ex auto's and gasoline and .7% at the core. The headline figure was less than expected while the rest were slightly better. But, with respect to non headline sales, because Dec figures were revised lower, taking the two months together were about in line with forecasts overall. Sales rose in electronics, building materials, food/beverages, clothing, sporting goods, dept stores and restaurant/bars and fell interestingly for online retailers, health/personal care, furniture and motor vehicle/parts. Bottom line, headline sales were below expectations due to the greater than expected fall m/o/m...
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June 23rd, 2009 at 6:50 am
There is a difference between inflation from rising prices due to demand and hyperinflation which occurs when a currency plummets because the country has enormous debts and imports eveything.
June 23rd, 2009 at 7:20 am
I must be a moron, why don’t I get this? We have a $2,000,000,000,000.00 deficit, which equates to $100,000,000,000.00 in bond sales per week. And oh by the way, China ain’t buying like they used to.
Additionally 50% of bonds come due in the next 12 months.
Sorry, but when I see QE to monetize that much debt I see a Zimbabwe dollar coming. I think there are 2 paths to “hyperinflation.”
IMHO the only thing that will save Ben’s but is if the market happens to conveniently tank and then money flows out of equities and into “securities.”
June 23rd, 2009 at 7:22 am
PS MarkG: I read your post after posting mine, I am grateful I am not alone. Well and concisely said.
June 23rd, 2009 at 10:13 am
The banks are holding on for dear life — they won’t admit it, but they have a long way to go before they start lending out money. It’s zombies all around. I have serious doubts that a wave of hyperinflation is coming any time soon (if at all).
June 23rd, 2009 at 10:51 am
“Long term” and “short term” are such relative words. If we are going to recover from this decession eventually, I don’t see how we CAN’T have inflation. Right now and in the next year (or 2, 3, 5, ???), when recovery hasn’t occurred yet, sure, the only way there’s going to be massive inflation is if no one buys treasuries anymore, which as a couple above have noted is quite possible. But even if this doesn’t happen, I think that at SOME point, there will be recovery, and when that happens, money will start circulating again and people will start leveraging again, only this time there’s a WHOLE lot more money going around. It’s pretty obvious that the FED is not at all concerned about this and they aren’t even going to start thinking about upping interest rates until after the recovery happens. So, sure, deflation may be the concern during the short term (there’s that pesky relative wording again), but from everything we’ve seen, massive inflation is not an “if” but a “when”. Where is this simple logic wrong?
June 23rd, 2009 at 11:28 am
Let’s not forget about all that quantitative easing and those bonds that might be counterfeit over in Italy.
June 23rd, 2009 at 4:14 pm
“IMHO the only thing that will save Ben’s but is if the market happens to conveniently tank and then money flows out of equities and into “securities.””
This is indeed the plan. The Alternate Market Tanking Economic Model (TAMTEM). Cycles of tanking in stocks, commodities, the $ and Treasuries. Eventually over years rates creep higher as the market and the $ creeps lower.
June 23rd, 2009 at 5:50 pm
If the monetary base is expanded by 100% that means that the total money supply could theoretically expand 1000% given an average lending institution leverage of 10x, am I right? I read Mish’s blog so I understand the arguments for deflation.