[Chuck]

$this->bbcode_second_pass_quote('MonteQuest', 'T')his is something everybody should be watching closer than Peak oil.

[RonMN]

One thing i coun't agree more on...it's all our OWN DAMN FAULT! When the SHTF and people want to find somebody to blame...we need look no farther than the mirror. Keep shopping at walmart while Americans loose their jobs! And when it's your job to vanish...blame somebody! Stay on that endless search for better bling-bling, that will help matters! And when reality gets too hard to deal with...pop a happy pill!

[Doly]

Monte,

For those of us that have trouble absorbing economic concepts, what does stagflation mean for the average person?

[Chuck]

$this->bbcode_second_pass_quote('Doly', 'M')onte,

For those of us that have trouble absorbing economic concepts, what does stagflation mean for the average person?

[MonteQuest]

$this->bbcode_second_pass_quote('Chuck', ' ') How is it possible that so many people buy the nonsense of that Greenspan-type and his dollar printing FED?

[MonteQuest]

$this->bbcode_second_pass_quote('Doly', 'M')onte,

For those of us that have trouble absorbing economic concepts, what does stagflation mean for the average person?

[shortonoil]

It appears that the FED is in a 1.5% straight jacket. If interest rates fall below about 2.5% the US won’t attract enough foreign money to cover our gigantic current account deficit. If interest rates rise above 4% the bond carry trade market folds and takes the $243 trillion derivatives market with it. That would bring down most of the country’s major financial institutes. As oil prices increase, that forces higher interest rate requirements to attract the additional money needed to finance the account deficit. As I’ve posted here before in “The $80 barrel fallacy”, I think the time is near at hand when the FED’s magic money machine is going to run out of gas.

[MonteQuest]

$this->bbcode_second_pass_quote('shortonoil', 'I')t appears that the FED is in a 1.5% straight jacket. If interest rates fall below about 2.5% the US won’t attract enough foreign money to cover our gigantic current account deficit. If interest rates rise above 4% the bond carry trade market folds and takes the $243 trillion derivatives market with it. That would bring down most of the country’s major financial institutes. As oil prices increase, that forces higher interest rate requirements to attract the additional money needed to finance the account deficit. As I’ve posted here before in “The $80 barrel fallacy”, I think the time is near at hand when the FED’s magic money machine is going to run out of gas.

[Chuck]

hear!, hear!

$this->bbcode_second_pass_quote('MonteQuest', '
')There are some dollar holders (such as hedge funds) located in the Caribbean, and no one knows who they really are. Some even go so far as to suggest they are US Treasury or Fed dollars coming in by way of the back door to fund deficits. In other words, buying our own debt with borrowed money, or worse, printed money.

[shortonoil]

I can readily believe that this is happening. If the FED openly began monetization, the rest of the world would become aware of the dilemma that the US is in. Foreign investors would run for the door so fast it would take a traffic cop to keep them from trampling each other. With a sizable portion of its foreign donations deserting, diaster would strike almost immediately. The world will find out soon enough so the FED must just be trying to buy a little time. Alan is probably trying to hold the ship together until he can abandon it next spring.

[MonteQuest]

$this->bbcode_second_pass_quote('threadbear', 'M')onte Quest, Deflation? How so? Prices lower to meet what people can afford? How about prices keep inching upward as the dollar weakens against other currencies, making imports more expensive, regardless of what people can afford.

[ONASIS]

Hi Everybody,

Do you think that PO will bring about a state of Stagflation (??), Where the economy isn't growing but prices are - not a good situation for a country to be in I'm sure !

This occurred to a great extent in the 1970s, when skyrocketing oil prices further slowed economic growth. The effects of inflation were made considerably worse by stagflation.

I can see that Global asset inflation is at play now which is causing huge residential property + commodity price increases. China + India, for example, are acting like a hugh magnet for commodities such as oil, scrap metals, steel products, and cement. This in turn is pushing up Ocean Freight rates both for dry cargo + oil Tankers (also increasing demand for marine fuel).

In the UK residential property has gone up 300% in the last 3 years alone + consumers have built up debts of over GB£ 1 Trillion !! Don't know figures for USA ??

In effect, money, currencies, etc., have been devalued over the last 3 years as they now purchase less - i.e. assets have appreciated by 300% - whereas your money in the Bank would only have grown by say 12% during this period !!

So, the developing economies are now acting as the 'offshore' manufacturing areas for the richer 'Western' Nations. In effect, the 'West' has evolved from agriculture through a 'Production' based economy and is now a 'Consumption' based model.

Of course, in order to sustain Global Expansion, this model needs growth + ENERGY !! i.e. No ENERGY = NO GROWTH !!

If we are in a PO zone then I fear that this debt bubble is going to burst + when it does it will make 1929, and the years that followed, look like a walk in the park !

Best Wishes,
Onasis - The Golden Greek -

[threadbear]

Well done, Onasis. That's it in a nutshell. It's not a sustainable situation. There's some confusion about the details in projected future scenarios, but anyone can see that it just can't go on.

[MonteQuest]

With the inflation genie coming out of the bottle, I thought I would bump this up to stimulate some new discussion.

Much has changed since I first wrote it.

[firestarter]

Unless more $'s flow to Joe Sixpack so as to meet the trickle down demands foisted on them from the front end beneficiaries vis a vis monetization, then I'm afraid deflation's coming (already here in housing markets to and fro) to a town near you right soon.

Yesterday's economic numbers we're, perhaps, the official ushering in of stagflation, and no doubt the Fed will do everything in its power to see to it that Joe sixpack's wages don't dilute the wealth of monitization's front enders. Message to the Fed: the jig is up.

The Fed's gun is reloaded 525 basis points. Let the games begin!

[MOCKBA]

$this->bbcode_second_pass_quote('MonteQuest', '
')Normally, in a recession (downturn in economic growth) prices deflate as there are too many goods chasing too few dollars (deflation). However, in a stagflation scenario, prices rise even in the face of declining purchasing power. Historically, this has only occurred when supply/demand could not set the price. i.e., a shortage of supply like the Arab embargo. The battle starts with what to do? Print more money to stimulate growth or raise interest rates to curb inflation. In the past, we opted for printing more money and ended up with double-digit interest rates.

[MonteQuest]

$this->bbcode_second_pass_quote('MOCKBA', '')$this->bbcode_second_pass_quote('MonteQuest', '
')Normally, in a recession (downturn in economic growth) prices deflate as there are too many goods chasing too few dollars (deflation). However, in a stagflation scenario, prices rise even in the face of declining purchasing power. Historically, this has only occurred when supply/demand could not set the price. i.e., a shortage of supply like the Arab embargo. The battle starts with what to do? Print more money to stimulate growth or raise interest rates to curb inflation. In the past, we opted for printing more money and ended up with double-digit interest rates.

[Zentric]

$this->bbcode_second_pass_quote('MonteQuest', 'O')il is not a commodity subject to supply/demand in a declining supply scenario. Higher prices will no more curb the demand for energy than higher prices will curb the demand for air or water. It will cut growth to zero and reprioritize the end use, but there will still be a core demand that will constantly increase as the population grows, or the standard of living and per capita consumption will have to take a dramatic downturn forever...or until the population is reduced to achieve a "balance."

[MonteQuest]

$this->bbcode_second_pass_quote('Zentric', ' ')I disagree based on the belief that the 70s Arab oil embargoes as well as the California electricity crisis a few years back ingrained conservation into peoples' daily routines. When these crises were resolved, standards of living were restored, yet the consumers' old wasteful usage patterns did not return until years later. Lesson learned might be that if you shock the supply in increments, label it as an emergency, the people can possibly adjust to using less without sacrificing standards of living.

[Zentric]

$this->bbcode_second_pass_quote('MonteQuest', '
')If jobs are sacrificed in order to use less (which must take place), those people might care to differ.

Waste is part of GDP as well.