Comments on: Inflation or Deflation: Which Is It?

By: The Periodic Table of Deflation: How Many Elements Do You See? | Balance Junkie

Mon, 23 Aug 2010 09:46:43 +0000

[...] inflation vs. deflation debate rages on, but for now, it looks like the deflationist camp has taken the lead. In the July [...]

By: Commodities and Real Estate: Pros and Cons | Balance Junkie

Commodities and Real Estate: Pros and Cons | Balance Junkie — Wed, 28 Jul 2010 09:51:06 +0000

[...] climates. So your view on whether to allocate money to these two may hinge on your position in the inflation vs. deflation debate. I tend to be in the camp that says we are currently in a deflationary environment, and [...]

By: Canada Day Weekend Reading: The Economy | Invest It Wisely

Canada Day Weekend Reading: The Economy | Invest It Wisely — Sat, 03 Jul 2010 12:07:07 +0000

[...] Inflation or deflation, which is it? Check out Balance Junkie’s post to find out his answer. [...]

By: 2 Cents

2 Cents — Wed, 30 Jun 2010 13:53:53 +0000

I think you’re right. A lot of the money the Fed has made available is not being put to work in the economy. Banks are holding it on reserve, probably to offset the toxic assets that would torpedo their balance sheets if they actually had to mark them to market. We need velocity in order to have real economic growth. Right now, money just isn’t moving.

Thanks for stopping by and for contributing to the conversation!

By: 2 Cents

2 Cents — Wed, 30 Jun 2010 13:48:45 +0000

I didn’t realize I had reached rant levels, but on re-reading the conclusion, I think you’re exactly right. I did rant. Watching this all unfold as our leaders continue to ignore those who got it right (and take counsel from those who got us into this mess in the first place) can be pretty frustrating.

I think you’re right about the fact that some of the manipulations will likely delay the recovery. Only time will tell if we actually experience a double dip. I’d say the chances are better than 50%. If if we don’t slide into another outright recession, we’ll likely have muted growth for some time.

Investors need to trust the rules of the game if they’re going to put their money on the table.

By: Interest Rates: 2010 Mid-Year Review | Balance Junkie

Interest Rates: 2010 Mid-Year Review | Balance Junkie — Wed, 30 Jun 2010 09:50:00 +0000

[...] Monday we looked at inflation and deflation. Getting the call on that debate right will likely determine the relative success of any portfolio [...]

By: csharp

csharp — Wed, 30 Jun 2010 05:38:40 +0000

For the last 5 years, I was convinced all this money printing was leading to massive inflation. Fast forward to now and with the credit crunch deflation seems much more likely. Money is not just the currency that is in circulation, but should also include credit. It doesn’t matter how much helicopter commander Ben prints money if overall credit is declining.

By: 2 Cents

2 Cents — Wed, 30 Jun 2010 01:14:37 +0000

After the first few months and a couple of hundred S&P points, I thought the rally started to seem unreasonable too. But I’ve learned not to be surprised by any market action over the past couple of years.

By: Roshawn @ Watson Inc

Roshawn @ Watson Inc — Wed, 30 Jun 2010 01:08:10 +0000

I agree with the rant on artificially-induced economic activity. It does get quite aggravating. Everyone knows this type of market manipulation can’t last forever. Perhaps the hope is that such manipulation will not need to last for much longer. The problem is some more pain is likely necessary before the markets heal. If we keep prolonging the pain, we also may prolong the recovery. Hence this is why many believe a slow recovery is more likely than a double dip. Investors hate such uncertainty (i.e. unpredictable manipulation), which is yet another reason why this economic environment sucks.
Roshawn @ Watson Inc´s latest post ..Millionaires Make a Return To Boom Levels

By: Kevin@OutOfYourRut

Kevin@OutOfYourRut — Tue, 29 Jun 2010 14:57:09 +0000

That’s really the central issue–there are too many forces pulling in too many directions. Not only is it difficult to project what might happen, but preparing for it is even more problematic.

It’s hard to believe that the stock markets have risen as much as they have since early last year given the heavy crosswinds. Collective insanity is the best I can come up with…
Kevin@OutOfYourRut´s latest post ..How to Control Your Spending Habits and Avoid Debt

By: 2 Cents

2 Cents — Tue, 29 Jun 2010 13:37:23 +0000

I think you hit at the core of the problem when you differentiated between the deflationary winds coming from the debt arena and the “real” inflation that’s possible as a result of money supply growth (printing money) to combat the deflation. Very low interest rates have contributed to some of the inflation as well.

While we worry about higher interest rates as a result of inflation, I wonder if selectively higher rates as a result of credit market problems may be another threat. Witness this morning’s failed ECB sterilization auction. That has U.S. bond yields falling sharply, but those of debt-laden countries like Spain rising. How long before the bond market pays attention to the U.S. debt problem and starts to dump American treasuries as well?

By: Kevin@OutOfYourRut

Kevin@OutOfYourRut — Tue, 29 Jun 2010 13:11:49 +0000

I agree with InvestItWisely, we can have both. In fact part of the problem in differentiating the two is that we already have both. We have deflation in wages, housing and certain manufactured goods, but inflation in healthcare, utilities and other critical services. Then we have energy and food as swing factors that can erupt in either direction with little warning.

We seem to have persistent real inflation (decline in purchasing power) even as certain prices fall. It may be that anything debt related is deflating into an environmetn of general inflation. This would explain the confusion on which way we’re going.

Just a guess, but eventually the debt backed side of the economy will play out, then we might enter a time with more obvious inflation, but that’s pure speculation on my part.

Great post!
Kevin@OutOfYourRut´s latest post ..How to Control Your Spending Habits and Avoid Debt

By: 2 Cents

2 Cents — Mon, 28 Jun 2010 18:01:57 +0000

These concepts can be pretty confusing. I don’t pretend to have a great handle on all of this, but no matter how many times I go over it, I come up with the conclusion that extra caution is warranted. The idea of falling asset prices and declining purchasing power isn’t pleasant. We live in very interesting times.

Thanks for your comment!

By: InvestItWisely

InvestItWisely — Mon, 28 Jun 2010 17:29:08 +0000

Nice post. We might be seeing a bit of both; that is, a decline in real asset prices (houses, stock markets, etc…) as well as a decline in the purchasing power of the dollar. Both can happen at the same time, and it’s a scary proposition.
InvestItWisely´s latest post ..Wisdom Distilled from the Top- A Yakezie Carnival