[nobodypanic]

and more from the same article:

$this->bbcode_second_pass_quote('', 'I')n conclusion: if you live a certain lifestyle, and make certain investments with your savings, then your purchasing power may decline with alarming velocity or remain essentially unchanged, or even increase, regardless of money supply increasing or decreasing.

[threadbear]

$this->bbcode_second_pass_quote('nobodypanic', 'a')nd more from the same article:

$this->bbcode_second_pass_quote('', 'I')n conclusion: if you live a certain lifestyle, and make certain investments with your savings, then your purchasing power may decline with alarming velocity or remain essentially unchanged, or even increase, regardless of money supply increasing or decreasing.

[cube]

If half the world population dies-off would that count as inflation or deflation.

[nobodypanic]

$this->bbcode_second_pass_quote('threadbear', 'A')ctually not. It didn't hold true for the deflation of the Great Depression, where prices dropped across the board, for starters.

[bl00k]

$this->bbcode_second_pass_quote('nobodypanic', '
')reread the conclusion. there's absolutely no way it can be wrong for any cricumstance--it's worded that openly.

[deMolay]

It seems to me the choices being offered to Congress by the Fed is either vote for the package which means 700B stoked into the furnace, multiplied a few times into the Trillions in tax dollars because it will be handled by Gubmint. Which would get us all almost to the next gas station or Inflationary Depression. Or face a financial collapse within days a Deflationary Depression. I think people should demand option 3. Scrap the Fed, and have Congress issue the currency, like they did until 1917, and the way the Constitution states.

[patience]

deMolay,

Right. What chance does such a Bill have of being introduced in Congress? We'll have to do this the hard way, methinks, that is, make all the wrong decisions first.

[mlit]

Deflation. At least in most areas.

While the Printing Presses are running around the clock and around the world, the government alone cant print enough money to cause inflation without banks loaning it out repeatedly and customers borrowing it for consumption purposes.

But there is always that chance that inflation could kick quite powerfully.

Its easier to predict the weather.

[patience]

Things change constantly, but this is what I've put together from the best heads I can find so far.

At the moment:
We have deflation-the Austrian School of economics definition, meaning a reducing money supply-due to credit contraction and imploding investments of the CDS, MBS, alphabet soup variety. This is because in today's world, money = debt, that is, money is LOANED into existence, and when loans stop being made, there is less spendable money available. This leads to another concept, the VELOCITY of money, referring to the speed that money changes hands, which currently is very low. The current mood of consumers is to reduce spending, so everything slows down, reducing the size and number of transactions.

So, we see prices dropping on certain things, notably big ticket items normally bought on credit-houses, and cars. Meanwhile, food prices are going up. Key factors (not the only ones) in this are oversupply of houses and cars, and a relatively inflexible demand for food, as examples.

We could call this stagflation, but so far, the inflation component might not be big enough to deserve that name, particularly since wages are stagnant, or falling, so the sum is deflationary to most prices-prices being the symptom, not the cause here.

The Federal Reserve and US Treasury, like most central banks and govts, are wont to do, are trying to prop up credit with fiat money poured into the banking system, but since that is not getting to the consumer to spend-no loans being made, except to the most crediworthy borrowers.

Coming up this year:
Melodramatic possibilities abound now, so choosing the most likely is hard to do. I believe that the Federal Reserve will continue to create fiat money to prop their bankster buddies, and the politicos around the world will try to placate their subjects with handouts. Bread and circuses for the masses, until they spend us all into oblivion. If that be so, then the money created in this manner-loaned into existence from central banks to govts who spend it into the public domain-will ultimately cause inflation of the money supply. Currently, the amount of credit being destroyed, I'm told, far exceeds the amount of fiat money being created, so this will take time to occur. A lot of bad debts must be washed out first.

The great looming problem for govts and individuals is their present load of debts. The US govt is promising to spend like crazy this year, but has to borrow it somewhere, and that is the next possible turning point, if they are unable to borrow sufficient amounts. Their are already unconfirmed (possibly confirmed) reports of the FED buying US Treasuries that did not sell otherwise into the market. If that be true, then we are seeing the start of unprecedented amounts of money creation by the FED, which is loaned to the govt and spent into the economy on make-work, and pork projects, diluting the dollar. Eventually, this results in inflation pressure.

The FED says they can control it all, but many pundits say not. I think the genie is out of the bottle now, and not going back. I expect something like stagflation (less money/wages/credit available coupled with rising prices on many things) to go on for a while in what is really a deflationary depression. Then, I think commodity prices will rise as many countries dilute their currencies, probably gradually over the next couple years.

If I KNEW what was coming up, I'd get filthy rich, but I don't. I'd like to see Threadbear, shortonoil, Eli, and several others weigh in on this.

[ralfy]

We may be heading for both: first deflation, and then inflation.

[Lolberg]

Great answer profile, this is the big ticket question right now and affects all investment decisions.

My take on this is: yes inflation is coming, but not yet, and I am not sure exactly when!

Be suspicious of anyone who claims to know this for sure. Especially the hyper inflation gold bugs who have been calling hyper inflation since 1973 and just happen to be associated with "Bullion-Vault" and the like.

[kiwichick]

decrease supply and flat demand = increase prices

decrease supply and decrease demand (but not as fast as decreasing supply) = increase prices




nonrenewable resources will increase in price ; oil copper ironore

so will some renewable resources ; water

[patience]

kiwichick,

All true. Now stir in geat variations in moeny supply from credit contraction vs oversupply of fiat currencies, and predicting gets very compicated. To make it really difficult, we also have supply destruction from demand falling off a cliff just now, (lower supply) and some commodities with somewhat inflexible demand--food and to a lesser degree probably, oil.

Out of this whole mess of factors, I'm thinking that fuel prices will go up at some point, and food more so, especially in relation to wages, which greatly increases the misery index. And, I can see the possibility of supply shortages in some areas as businesses fail. Beyond that, I can't guess.

edit to add: Example of what I expect---locally, seed potatoes are advertised at $17.99/50 lbs. (high, but not too bad a price) at a grocery in Indiana, BUT, they don't have any!