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Senior Contributor

Re: Inflation or Deflation/Deflationary Spiral

Never say NEVER. You are probably right, but sometimes bureaucrats and politicians do stupid things which have unintended consequences

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Re: Inflation or Deflation/Deflationary Spiral

PS. Bomber Ben will be gone soon- I've recently desisted from making snarky remarks about him but you might say that he's going to get out of town at a point where he can claim victory from a tie and before the final test of the effectiveness of his theories on dealing with a liquidity trap.

 

Whoever replaces him will be well vetted, just like he was. When he started getting face time as the next Chairman it was pretty clear that we were going to fight the next great depression his way. Similar clues might emerge as the next Chair is vetted.

 

Also, I do think it is important to watch what happens with Abenomics in Japan. There will be direct knock on effects but also will most certainly impact what is thought to be effective policy.

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Re: Inflation or Deflation/Deflationary Spiral

http://krugman.blogs.nytimes.com/2013/05/24/the-four-percent-solution/

 

"But Ball also argues that the risk of liquidity-trap events is much greater than conventional wisdom would have you believe. Just looking at US experience, the last three recessions were all “postmodern” recessions caused by private-sector overreach, not Fed tightening — and in each case the Fed had a very hard time getting traction. Both 1990-91 and 2001 were near misses in terms of the liquidity trap; 2007 onwards was actually in line with what had become the normal pattern, not a bizarre exception."

 

I don't exclude myself when I say that they must be giving out Econ PhDs with three box tops and a stamped self addressed envelope because everybody thinks they have one. In my mind that would aslo include some hedgie masters of the universe who hit the lottery and aren't smart enough to know it and repair to a private island.

 

Anyway, the story is far from written here.

 

 

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Senior Contributor

Re: Inflation or Deflation

Interesting discussion today. Although I am not smart enough to predict whether the next monetary crisis will come in the form of either a deflationary event or its polar opposite, inflation, I do think the prudent decision maker will try to prepare for both events when aligning his portfolio. Yeah, I know guys; it's a lot easier said than done.

 

For investors, it will mean taking a long term perspective (i.e.. 10-15 + years), maintaining a healthy diversification of one's assets across all fields (equities, bonds, cash, REITs, land, precious metals, collectibles, etc.), paying close attention to one's management/maintenance costs, and lastly, retaining an optimistic sense in American exceptionalism (This too shall pass).

 

For business owners, to include farmers, it will mean "keeping your head down and just concentrate on doing the cooking." The best insurance for surviving economic adversity for owners is to continue performing and improving on whatever it is that you already do so well. Serve and expand your your customer base. Deliver product. Conserve, shepherd, and otherwise share your vital resources wherever possible. Pay close attention to the risks of taking on significant portions of long term debt should deflation be in the cards. Conversely, you also need to worry about allowing yourself to be caught holding a great deal of depreciating cash/bonds should rampant inflation be in our future. Prepare to batten down the hatches men and good luck to all.

 

Semper paratus,

Packard

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Senior Contributor

Re: Inflation or Deflation/Deflationary Spiral

Yes, I probably should not of said a Deflationary Spiral (DS) can never affect our country, as you said, anything is possible. But, Boy, this country will do everything possble to not allow a Deflationary Spiral to develop and take hold. This country will be on it's knees if a DS ever happens again. Of all ecomic concerns, by far the worst thing is a DS that I can imagine. That scares the hell out of me. 

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Senior Contributor

Re: Inflation or Deflation/Deflationary Spiral

Scares me too.

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