We have deflation of footballs and deflation of my lungs after round 1 out there in the driveway. Back in and taking a break, I always find Jeff Gundlach an interesting listen. Maybe you will too… Pardon the ad if one pops up in the 1st 30 seconds.
- Canary’s Alive & Well –NFTRH 327’s Opening Segment
- Drivers for the Week Ahead –Across the Curve
- Would a Gold Standard Brighten Economic Outcomes? –Big Picture [biiwii comment: the old argument… the author’s conclusion is laughable as practically applied by today’s CB’s (“a gold standard is not needed to preserve price stability as long as a country’s central bank is independent and has a clear mandate to achieve price stability“), but a gold standard for a modern financial and economic system is not the answer; discipline and transparency are the answers in large part imo; esp. discipline, which is lacking world-wide]
- On Banking Underperformance –GaveKal
- The Deflation Threat –Alhambra [biiwii comment: no, not footballs!]
Guest Post by Michael Ashton
Money: How Much Deflation is Enough?
Once again, we see that the cure for all of the world’s ills is quantitative easing. Since there is apparently no downside to QE, it is a shame that we didn’t figure this out earlier. The S&P could have been at 200,000, rather than just 2,000, if only governments and central banks had figured out a century ago that running large deficits, combined with having a central bank purchase large amounts of that debt in the open market, was the key to rallying assets without limit.
That paragraph is obviously tongue-in-cheek, but on a narrow time-scale it really looks like it is true. The Fed pursued quantitative easing with no yet-obvious downside, and stocks blasted off to heights rarely seen before; the Bank of Japan’s QE has added 94% to the Nikkei in the slightly more than two years since Abe was elected; and today’s announcement by the ECB of a full-scale QE program boosted share values by 1-2% from Europe to the United States.
Guest Post by Elliott Wave International
Debt and Deflation: Three Financial Forecasts
There’s more to deflation than falling prices
Editor’s note: You’ll find the text version of the story below the video. Join Elliott Wave International’s free State of the U.S. Markets online conference to get prepared for the major moves in U.S. stocks, commodities, gold, USD and more for 2015 and beyond. Register now and get instant access to a free video presentation from market legend Robert Prechter and regular email updates with insights from our most recent publications and presentations from our key analysts.
Inflation ruled from 1933 to 2008.
Yet in the just-published Elliott Wave Theorist, Bob Prechter’s headline says, “Deflation is Starting to Win.”
Take a look at this chart from The Telegraph:
- Stocks Rise as on China Growth, ECB Bets as Dollar Rises –Bloomberg [biiwii comment: surprised? anyone? the theme is up and down chop, i.e. swings, that will eventually lead to resumption of or negation of trend. oh, and the media are busy manufacturing reasons as usual]
- Martin –Josh Brown [biiwii comment: 3 simple quotes; read them]
- Global Monetary Policy Amidst Deflationary Concerns –Ana Maria Santacreu @ St. Louis Fed
- January 20 2015 Opening –Across the Curve
- What Next for the CHF? –Daily Forex
- SNB’s Move and What it Means for Gold Investors –Hebba Investments
- The Retail FX Market is a Complete and Utter Joke --Kid Dynamite
- Sound and Fury –Springheel Jack
- Stefan Kremeth on SNB action –Incrementum AG
- The Dangers of Leverage –Alhambra
- The Charlie X Solution –Tim Knight
- A 2015 Comeback for the Middle Class? –Josh Brown
- A Little Fear About the ‘Fear Index’ –Opp ID’d
- Central Bank EUR Reserves Plunge –GaveKal
- Mixed Employment Report –Dr. Ed
- Demand factors in the collapse of oil prices –Econobrowser
- A Closer Look: Commodities –Alhambra
The Deflation Calamity Howlers Are Dead Wrong—-In Europe And Everywhere Else
The calamity howlers of deflation are out in force this morning owing to an absolute economic non sequitur. Namely, that year-on-year consumer prices in the EU came in at negative 0.2% in December, implying that ECB printing presses need to go into immediate overdrive.
Well, of course the CPI has momentarily weakened. Crude oil has experienced a monumental plunge of more than 50% since mid-2014. That has temporarily dragged down the euro zone’s reported CPI and the math isn’t all that complex. During the last 12 months, euro zone energy prices have fallen by 6.3%, and everything else is still 0.6% higher than a year ago.
So what’s the emergency? This is the very same CPI blip that occurred when oil collapsed in the second half of 2008. As is evident below, that episode did not generate some cascading plunge into economic darkness. In fact, the Eurozone CPI was back running above 2.5% in no time.
The truth of the matter is that the EU-19 is in clover because it’s consumers get a big break; and, on the other side of the economic equation, it produces almost no oil. Europe’s production is mainly in the UK and Norway and they have their own currencies. Accordingly, the ECB should be putting its printing presses on an extended sabbatical and declaring victory on the achievement of its “price stability” objective.
Guest Post by Michael Ashton
Today’s column is a brief one, as I need to post a correction. Not a correction to my stuff, mind you, but to others.
Pictures like the below have been circulating now for a couple of weeks. This is a chart of the 2-year inflation “breakeven” on Bloomberg, illustrating how a “deflation warning” is sounding as they go negative.
- Goodbye Inflation – Hello Deflation –Martin Armstrong
- All About That Base –Jeff Saut
- The Truth About Oil in Modern Society –Josh Brown
- Yenny for Your Thoughts –Tim Knight
- Revisiting the ‘Problem’ With Leveraged ETFs –Steve Saville
- When Speculators Believe They Are Value Investors –Price Action Lab
- Fill’er Up –Market Anthropology [biiwii comment: a few days late but interesting viewpoint on the post-2011 disinflationary phase]
- 5 Themes for 2015 –SeekingAlpha [biiwii comment: this SA post disputes MA’s view; what makes a market and all…]
- For CNBC 2014 Was the Worst. Year. Ever. –Zero Hedge
- Inflation, Prices and Economic Outlook Through Them –Alhambra Partners
- 14 Best Visual Capitalist Infographics of 2014 –Visual Capitalist
 December ISM just out, details here –NFTRH.com
and… What Happens After a Big Down Day Between Christmas & New Years –QuantEdges
Guest Post by EWI
Jaguar Inflation – A Layman’s Explanation of Government Intervention
I am tired of hearing people insist that the Fed can expand credit all it wants. Sometimes an analogy clarifies a subject, so let’s try one.
It may sound crazy, but suppose the government were to decide that the health of the nation depends upon producing Jaguar automobiles and providing them to as many people as possible. To facilitate that goal, it begins operating Jaguar plants all over the country, subsidizing production with tax money. To everyone’s delight, it offers these luxury cars for sale at 50 percent off the old price. People flock to the showrooms and buy. Later, sales slow down, so the government cuts the price in half again. More people rush in and buy.