Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Why The Inflationists PROBABLY Have It Wrong, For Now

Economics / Deflation Oct 03, 2011 - 01:27 PM GMT

By: David_Haas

Economics

Many people are trying – with increasing desperation – to discern the future and plan correctly for the economic environment we’re most likely to find ourselves experiencing.

My continued bets have been that deflation will prevail, at least in the early years of the great collapse, and nothing has yet occurred that changes my view.


To further advance your personal understanding of the powerful forces (people) at work in the hidden halls of high finance, here is an excellent “scholarly” historical analysis of the inflation/deflation debate and how it might pertain to the US economy going forward.

The Politics of Deflation

I think the author, Vijay Boyapati, really “nails it” in the above article and his conclusion describes exactly what we are seeing and will continue to see for, perhaps, up to two decades – like Japan now and the US in the 1930’s and 1940’s.

Longer term, I believe that US politicians are likely to be less patient with the continuation of a painful and protracted deflation than Japanese politicians have been, so we’re somewhat less likely to experience deflation running out to – or beyond – 20 years as the Japanese have.

In the meantime, unless the political class wrests complete control of the ability to dictate monetary policy (money creation) from the banking class, controlled deflation will most likely be the policy pursued to correct the excesses of the (Greenspan) housing bubble and the other bubbles that led up to it.

(Background Note: To long-time observers, the US housing bubble is seen, essentially, as the terminal blow-off phase of the great 25 year inflation experiment initiated by “Reaganomics” in the early 1980’s. Its creator, Alan Greenspan, pursued this inflationary policy relentlessly until he, quite literally, “pricked his own bubble” with his remarkably well-timed retirement as Federal Reserve Chairman. Some might even call this global inflation experiment “Greenspan’s life’s work”. I call it “little more than a lot of hot air”. So much for Greenspan’s life’s work and Time Magazine’s 1997 “Man of the Year”. Reminds me of Barack Obama “winning” the Nobel Peace Prize, but I digress…)

Should we happen to see the political class gain control of monetary policy (most likely as a result of a powerful “in the streets” social revolution brought about by too much deflation and too much “fiscal austerity” for too long a time), then hyperinflation does become a VERY REAL threat. But probably not until then.

As we’ve seen, bankers are not suicidal (actually, they’re quite cowardly) and aren’t likely to deliberately pursue a policy of slitting their own wrists monetarily. They prefer to see ONLY the blood of others running in the streets – while they enjoy their afternoon tea and crumpets.

All holders of assets that depend upon inflation to drive further price expansion (read: speculation) should take note. Precious metals are included in this group and – despite some natural, intense price volatility due to panics – will probably continue to succumb to the powerful deflationary forces this time around, too, as they have in deflations of the past.

In this expected “slow, grinding deflation” environment, safe, boring assets can come out winners along with executing a long-term plan for the slow, deliberate accumulation of both real and financial assets at generational low prices. In a deflation, this is EXACTLY what the bankers, themselves, will be doing.

Of course, real and financial assets are the things that will benefit from the EVENTUAL RETURN of inflation once the deflation has fully played itself out. We’re nowhere near that point yet. Cash is still king.

Remember, baby-boomers and their heirs will be “net sellers” – liquidating virtually anything and everything they can – for the next 25 years.

Since subsequent generations are smaller, who will be buying and at what price? Sounds like an environment ripe for “yard sale” pricing to me.

Just my two cents (or 4 cents thanks to Greenspan…).

For more interesting articles and commentary please visit: http://www.haasfinancial.com

    By David Haas
    Consultant

    http://www.haasfinancial.com

    In my consulting practice, I work with individuals, business owners, and professionals.  I assist business owners and professionals in several critical areas ranging from business start-up, marketing, operational challenges, employee retention, and strategic planning to personal asset protection, financial, and retirement income planning.  Often, these areas relate and need to be integrated to work most effectively.  I also assist business owners in developing exit-strategies that enable them to maximize the value of their business interests and preserve their lifestyle in retirement.  For individuals, I primarily focus on tax reduction, financial, and retirement income planning.

    © 2011 David Haas, Consultant


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in