Roubini says there will be no inflation … ji,%5Egspc

Kind of surprised on this one that he has so much belief in the Fed that they will turn off the printing press in time.
Albert Edwards (and his prodigee, James Mautier) are still worried about inflation, however.

I was in the camp that inflation is a dead-set certainty, but influential opinions are talking it down. Intersting…

I am in two minds on this myself.

For sure, the activities of the monetary authorities in the US and UK ought to result in inflation. However, there are serious deflationary headwinds too - not least of all the reluctance of banks to lend. Furthermore, most developed economies are going to have lots of idle labour and capital stock hanging about. I find it difficult to reconcile square a lot of under-utilised industrial and labour capacity with high inflation (though we managed to achieve this in the 1970s).

F*****g Henry Blodget!!! THat interview would be like Tom Parlon interviewing Morgan Kelly over here.

I have said this many times before but so many seem to forget.

The amount of money that world central banks are “printing” is buttons to the money that has been destroyed in this crisis.

The value of money lost on US homes already is estimated at 8 Trillion - that is just homes!!! Forget about equitity markets and 401ks

This was written in September 08

Actual losses in the US real estate market are much higher than what you have been reading in the newspapers recently. Using a combination of official government statistics and the most widely used index of housing values, we will demonstrate that the US real estate market has lost a total of $6 trillion in value in the last two years. We will show that an average house that was worth about $226,000 in 2006 is, once you adjust for inflation, down to a real value of only about $160,000. To put what a $6 trillion loss is into perspective, we will show that when all factors are taken into account, the two year drop in US real estate values is equivalent to wiping out the entire retirement savings of all 78 million Baby Boomers, and annual housing losses are close to the annual GDP of China. We will close by talking about how this national disaster creates major personal profit opportunities for people who can learn to look beyond the false number of nominal dollars and into the reality of how wealth is rapidly redistributed during times of economic turmoil.

Like he said. That’s one motherfucking big hole in the swimming pool… :open_mouth:

Yes, this is the common argument for deflation.
However, a scenario might arise when the housing market stabilises, where the Fed keep buying treasuries and the value of the CDOs recovers (as people actually have kept repaying their mortgages, because interest rates were so low they could afford them).
Thus much of the value that is now “destroyed” - CDOs at 20c in the dollar, may suddenly reappear - e.g., 50c in the dollar. And the Fed has printed the remaining deficit, and boom we have inflation.
In any case, the increase in the money supply since 2001 hasn’t fed into inflation to the extent it should have. I know the inflation figures are mostly under-reported, but could we have a reverse effect where printed money goes quickly into the system but the money supply is still shrinking?

Perhaps this is because the US exported its inflation to china during that period.
The 2 trillion dollars sitting in chinese sovereign wealth funds would have caused higher inflation in the US if it had remained there.

It seems a rebalancing of the world economy is in order.
The creation of a domestic market in china would help both the chinese and the US.
The US would have to rely on domestic production and that would reinvigorate its own industrial base.

Possibly the danger of having so much money lying around in a non inflation environment in the USA is that once the banks are stabilised they may start providing credit lines overseas and dollars start chasing overseas investment instead of providing credit for domestic business.

I am also of the opinion as well that will not see significant inflation. For that to occur demand needs to exceed the supply of commodities and raw materials and that is not happening anytime soon.

Yup, that would be me. I think we will see localised inflation as economies go bang, or rather, as currencies go bang - Iceland, Hungary, the Ukraine etc., but also perhaps the UK. But in the UK, it will be uneven depending on whether the products are imported, so it may be offset by deflation in other areas of the economy.

I don’t believe China/Oil-producers/SWFs keeping dollars was the only disinflationary factor.
Here in the Eurozone, M3 was 10-15% for 5-6 years without feeding into inflation and we had a balance of payments surplus for most of that time. So inflation isn’t always immediately a monetary phenomenon (there’s often a lag).

Also, what about the possibility of a dollar collapse causing those dollars to flood back to the US?
I still thinks there’s some reasonable probability scenarios out there that may arise causing inflation to take hold again.
Anyone know if you can buy euro TIPs off retail brokers?

What’s all this about not having had inflation? Look around you. Look at house prices. Look at the salaries. Then look at the property bubbles all over Europe. Then factor in the China deflation. Yes, over the eurozone prices have remained stable, but they should have been dropping given the deflationary effects of cheaper consumer goods and property prices in the periphery have soaked up masses of excess capital. Capital that is now not likely to be repaid.

I thought that money never existed …

The US eventually need sot inflate it’s way to debt reduction, by the time this is all said and done the US will likely owe China over $5 trillion, another $5 trillion around the world and will need to inflate to get beyond the point of debt being a burden to future growth. There has been incredible inflation in assets over the past 10 years and none in US wages, the assets are correcting, the wages will need to inflate in order to provide a basis for future growth. Floods of credit are liekly gone for the next 10 years and cannot form the basis of recovery, real wages will have to increase.
China could well devalue the yuan to spur manufacturing, whether directly or indirectly through soem of the proposed currency baskets, if tha thappens inflation may be tamed, if not I cannot see any way to avoid significant inflation by 2014.

Im in no doubt whatsoever - there will be serious inflationary consequences.
Just be wary of how inflation is calculated and see if their methods change to accomodate falling asset prices against increasing commodity prices (i.e. the opposite of what we had over the past 10 years or so).

I agree that inflation won´t happen as a side-effect of central bank policies.

I believe it will happen as a direct objective of government policy. That is precisely what Roosevelt did when he devalued gold by a massive percentage.

If inflation is NOT directly introduced, the world system will slump disastrously and will not recover 1990s level of activity until well after 2030.

People will be marching in the streets demanding “inflate now”.

If Merkel manages to stay in power, then the Euro is toast.

France, Italy and Spain will break off and form a devalued high-inflation currency union. They might even decide to cancel their debts to Germany. That was one of Lenin´s first actions.


sorry, just jumping in here with some general thoughts on inflation, apologies if this stuff has been said already…


definition of term “inflation”(feel free to disagree)

“inflation” for the purposes of this question = “the increase in nominal prices” not “increase in amount of money in circulation”. increase in amount of money in circulation will be seen as an inflationary pressure but not inflation per se.

We need to distinguish between 2 types of inflation. theres the 1. cpi inflation (or deflation) and 2. general asset price inflation or (deflation).

imo there is little doubt that what we are experiencing in terms of asset prices(stocks) is currently deflation. but there is less (but there is some) cpi deflation.

in japan during its years of stagnation there was consumer price deflation only very breifly. i think for only one year. and in that year it was a fairly shallow deflation. however asset prices (im talking about stocks) continued to deflate strongly.

im sure the money being printed at the moment will find a home. but

where will that home be?

  1. will it counteract entirely and evenly the deflationary pressures of a slower economy? or will one asset class in particular become distorted by excessive money pumping?

  2. will it go more into the cpi or other assets?

  3. could excessive protectionism not present just as great an inflation threat to markets as printing money.

i know its a bit general…just interested in hearing your very intelligent musings


I think there is a simple binary choice here.

In the absence of global inflation, an immense wave of job destruction will begin. About 50% unemployed and 30% declared bankrupt. Interestingly, Germany seems to favour this option.

now that invading everyone and slaughtering their ethnic minorities as off the cards, this kind of blitzkrieg is apparently palatable, like a nicotine patch, I guess.

Hey Ange, let´s make a deal. We all have to walk around in stripey pyjamas for a year, and you drop your obstruction, hold the election and get wiped out by Die Linke, what you say?

When you pull a home equite line of credit on it…it exists alright.

Make no mistake… it was very real when it was people were buying the million dollar homes, or those who had them were spending on the back of it. Just as its also very real now the mess that we are in.

Its almost safe to say that if it was not real then - the problems now would not be real either…and that would hardly be true

Remember my analogy of the boiling milk pan,is Helicopter BEn going to pull it just at exactly the right moment?Or will he continue the tradition of previous Fed governors and create inflation to boost bank profits and benefit Wall St,hmmm dificult one that.

Hmmm … just checking that you do realise how they are all interconnected …

*The Weimar Republic had some of the most serious economic problems ever experienced by any Western democracy in history. Rampant hyperinflation, massive unemployment and a large drop in living standards were primary factors. In 1923–1929 there was a short period of economic recovery, but the Great Depression of the 1930s led to a worldwide recession. Germany was particularly affected because it depended heavily on American loans. In 1926, about 2 million Germans were unemployed - this rose to around 6 million in 1932. Many blamed the Weimar Republic. This was made apparent when political parties on both right and left wanting to disband the Republic altogether made any democratic majority in Parliament impossible.

The Weimar Republic was severely affected by the Great Depression. The economic stagnation led to increased demands on Germany to repay the debts owed to the United States. As the Weimar Republic was very fragile in all of its existence, the depression proved to be devastating, and played a major role in the NSDAP’s takeover. *

I’m sure you are aware of the link … but just checking :angry: