Stagflation

[jefftheshark]

Here is a well-written article that explains the current issues as well as any I've read recently - it's fairly good for one that doesn't end up blaming the entire mess on aliens that is.

It makes the argument we're headed toward higher interest rates because the Central Bankers are too terrified to admit they made a mistake back in 2008. Whether or not the civil unrest in the ME and elsewhere is the fault of the CBs or the unintended consequence is immaterial as the results from high oil prices are about to make a mess of things regardless.

link

JTS

 

[conraddobler]

Stagflation was caused when the boomers first got rocking buying stuff like homes and cars and such.

To assume this is going to also happen when they stop buying stuff and start selling stuff is a stretch.

I see more deflation than most myself, yes gas is high and it will strangle the rest of the economy over time, there is no there, there to get high rates, shoot 6% mortgage rates would annihilate the financial universe, houses would be worthless.

There is no case for the rising rate scenario, in fact the opposite is likely true or pure collapse because there is no room for rates to rise, none.

 

[jefftheshark]

Stagflation was caused when the boomers first got rocking buying stuff like homes and cars and such.

To assume this is going to also happen when they stop buying stuff and start selling stuff is a stretch.

I see more deflation than most myself, yes gas is high and it will strangle the rest of the economy over time, there is no there, there to get high rates, shoot 6% mortgage rates would annihilate the financial universe, houses would be worthless.

There is no case for the rising rate scenario, in fact the opposite is likely true or pure collapse because there is no room for rates to rise, none.

When you see a guy like Bill Gross at PIMCO dumping his treasuries link then I have to wonder where he thinks rates are going.

Of course you could make the argument that he foresees an abrupt end to QE2, and the resulting panic when everyone flees to the exits. This would be hugely deflationary and bolster your thoughts. However in an equity panic you'd think the $ would run to bonds.

Oh my aching head.

Such is the fun of living in a State Controlled Economy I guess. Insiders are either gaming the system or government shills. Welcome to the casino economy.

**** <=== very bad word

JTS

 

[conraddobler]

When you see a guy like Bill Gross at PIMCO dumping his treasuries link then I have to wonder where he thinks rates are going.

Of course you could make the argument that he foresees an abrupt end to QE2, and the resulting panic when everyone flees to the exits. This would be hugely deflationary and bolster your thoughts. However in an equity panic you'd think the $ would run to bonds.

Oh my aching head.

Such is the fun of living in a State Controlled Economy I guess. Insiders are either gaming the system or government shills. Welcome to the casino economy.

**** <=== very bad word

JTS

I think it means that it's now again a good time to buy bonds.

This announcement is past tense, ie he sold it, the yields ramped, if he were going to buy back in he would hardly announce that and raise the price on himself now would he?

No if he was going to buy back in he'd have to make it look like that's the last thing he'd do and that's pretty much what that kind of talk smacks of to me.

He's got the largest cash position in his funds history, I hardly think that means he's worried about inflation.

 

[Pariah]

I just listened to an interesting (and entertaining) Stuff You Should Know podcast about stagflation. Scary stuff, and it sounds like we're in a perfect storm of conditions for it.

If you don't, you should be listening to this podcast in general...it's friggin' awesome. They cover heavy stuff like stagflation, but they also run the gamut, covering everything from pop culture to science and history.

 

[Dback Jon]

I just listened to an interesting (and entertaining) Stuff You Should Know podcast about stagflation. Scary stuff, and it sounds like we're in a perfect storm of conditions for it.

If you don't, you should be listening to this podcast in general...it's friggin' awesome. They cover heavy stuff like stagflation, but they also run the gamut, covering everything from pop culture to science and history.

But do they cover UFO's?

 

[Pariah]

But do they cover UFO's?

There's a podcast called "stuff they don't want you to know" that does. Seriously!

There's a whole series of "stuff" podcasts over at HowStuffWorks.com. It's owned by Discovery Channel.

 

[Russ Smith]

Article in my local paper today about this, didn't call it stagflation but same general idea. Prices starting to rise, people still out of work. Quoted the director of Sunnyvale Community Services which is where I volunteered while out of work, she said they're seeing more and more people sign up for free food to make ends meet now. sad, it was bad enough when I was there in just 9 months I could see the increase in people needing help, now prices are going up too.

But the POTUS is going on tv to talk about gas prices so all is well.

 

[conraddobler]

Article in my local paper today about this, didn't call it stagflation but same general idea. Prices starting to rise, people still out of work. Quoted the director of Sunnyvale Community Services which is where I volunteered while out of work, she said they're seeing more and more people sign up for free food to make ends meet now. sad, it was bad enough when I was there in just 9 months I could see the increase in people needing help, now prices are going up too.

But the POTUS is going on tv to talk about gas prices so all is well.

There's a basic Austrian theory about stagflation and it goes something like this.

During a time of loose money, ie the FED giving banks 0% rates letting them in effect heal themselves by borrowing at zero and investing in treasuries at 3.5% with infinite leverage, this flushes new money into the system and the greatest beneficiaries of this are the first users, IE the banks.

As this washes through the economy though people realize they're being flooded with new money, so the value of this new money starts to degrade as it goes through the system, or becomes obvious it's there, dropping the value of all money in the system because the amount of money is now bigger.

The last people to get ahold of this new money are the people who actually produces stuff and so they get the least benefit out of it and their wealth is stolen and in effect transfered to the bankers.

This reduces productivity and growth by starving the producers of value and giving it to the bankers.

This is why you get rising prices and crappy growth and given the size of the wad of this policy that's just been unleashed upon us you can expect this to be horrific in it's implications for stagflation.

Stagflation is where everyone basically but banks and those nearest the newly flowing money gets poorer and poorer the closer you get to someone who actually produces something, it's ass backwards in other words.

IMO it's not exactly the same as the 70's version, remember though that Nixon in effect took us off the gold standard and set in motion the price hikes later on with a flood of fiat money.

During that time the boomers were demographically different than now, that was a perfect storm of another kind, with crazy demand, crazy crappy unemployment, crazy de-industrialization and money printing it was truly maxed out weird with the Vietnam spending hitting enormous amounts too.

This time around housing is in the toilet first but the productive economy is next up.

I would say this entire crisis we're seeing now is merely the foundations of a massive one to come within about a decade.

IMO we'll putter along getting weaker and weaker for a near death knockout blow to be delivered via the bond market at a later date, until then I think prices will remain subdued due to a tug of war between inflation and deflation.