Thursday, July 30, 2015

Deflation is Back Front and Center

Here is a good rundown on the deflation situation:

In May 2011 this analyst changed his mind about the impact of the monetary love being spread around the world by developed world central bankers. He stopped forecasting higher inflation and instead foresaw the return of deflation.
Fresh from the battering in the deflationary storm of 2007-2009 investors did not want to hear that such monetary love would be in vain. They counted on central bankers then, just as they are counting on them now, to restore a level of nominal GDP growth that can prevent the severe burning of another painful deleveraging through default.

And its genesis in mal-credit:
Most investors still believe that we live in a fiat currency world. They believe central bankers can create as much money as they believe to be necessary. Such truths are on the front page of every newspaper, but they may contain just as much truth as the headlines of their tabloid cousins. A belief in this ability to create money is the biggest mistake in analysis ever identified by this analyst.
As usual, the arguments are hard to follow because the writer uses the word "money" for everything from credit to currency to whatever.  If you want to understand perfectly well everything tha is going on economically, then simply get the terms defined correctly, and stick to them.

Feel free to forward this by email to three of your friends.


Anonymous said...

John, I just came here to say: Thank you!

Although I am still working to set things up. I almost forgot that I wouldn´t be here if it weren´t for your teachings on international trade.


your student from the other side of the world.

Anonymous said...

Is it still possible to trade with countries that have embargos if the product is a specialty item (food in this instance) that is not available available in its own market?

Sanctions have failed. Buy Russian is working:

John Wiley Spiers said...

That all depends ... check with your customsbroker.