"A Full Blown Deflationary Episode" Coming

In his latest missive, Albert Edwards, among other things, touches on two of the most critical drivers in the current economic climate: deflation and Treasury supply. His observations lead him to conclude nothing good about the follow-through for the current bear market, liquidity driven, short squeeze induced equity rally...

The media's desire to ignore this metric, which convincingly indicates that deflation is among us, despite the wanton destruction of US Dollars by Chairman Ben, is not surprising: the last thing US consumers need to know is that a dollar today may be worth less than a dollar tomorrow, and thus drive them to save even more, further crippling the Ponzi monster that the US economy has become.

Zero Hedge

While I do not agree with everything stated they are on the right track. We are either heading for a big deflationary episode, as he puts it, or we are going to hit hyper inflation because of the FED. I highly suggest everyone reads the entire piece.

If you compare the United States today to Japan of the 1990s and the US of 1929 you see many correlations. The US looks to be flat lining it's economy like Japan has and it looks to be heading for another crash within the next few months.

All the prospects I have seen within the future are grim and quite frightening if you ponder on them for long enough

And believe me I have.



Read the article, it's very good and will give you insight onto many things if you dont already possess that insight.

He doesn't seem to know what he's talking about, he says "the last thing US consumers need to know is that a dollar today may be worth less than a dollar tomorrow, and thus drive them to save even more, further crippling the Ponzi monster that the US economy has become."

That does not happen, when people think the dollar (in reality, the assets that are dollar denominated) are going to be worth less in the future, then they save. They would not save money if they thought the dollar was going to be worthless. It's like saying someone would hold and buy more stock because they thought it was going to go down in value.

So...he doesn't really seem to have a grasp on...basic economic, so I'd take what he says with a grain of salt. Though I do think we are in for another whiff of deflation.

Originally posted by yellowcard
He doesn't seem to know what he's talking about, he says "the last thing US consumers need to know is that a dollar today may be worth less than a dollar tomorrow, and thus drive them to save even more, further crippling the Ponzi monster that the US economy has become."

That does not happen, when people think the dollar (in reality, the assets that are dollar denominated) are going to be worth less in the future, then they save. They would not save money if they thought the dollar was going to be worthless. It's like saying someone would hold and buy more stock because they thought it was going to go down in value.

So...he doesn't really seem to have a grasp on...basic economic, so I'd take what he says with a grain of salt. Though I do think we are in for another whiff of deflation.

you simply misunderstood what zero hedge was saying

you have to understand that ben bernanke is trying to manage EXPECTATIONS of some sort of inflation in the future albeit "low"....this is what he WANTS people to believe....so they spend ...we are a consumption economy but you KNOW this....

should people believe a dollar will be worth more next year than this year they will save.....this is EXACTLY what zero hedge was saying.....he just used different words that THREW YOU off.

it's really pretty simple......you even say in your post that he says " the last thing consumers need to know is that a dollar today may be worth less then a dollar tomorrow" i.e a dollar tomorrow is worth more than today

we shall see but there is truth that ben wants consumers to believe deflation is a fantasy and that some inflation is ahead otherwise.....they will stop spending and accelerate more job losses

it should be noted thou that most stats that measure consumer saving's rate's (saving is healthy) are MIS-LEADING. most of the formula's take money that is not spent on consumption and put it into "saving's" category .....the devil in the details is that a lot of consumers are deep in debt ....seeing credit lines and disposable income fall and not necessarily saving the money but using it TO PAY OFF DEBT!!! and the money going to paying off debt is not being measured and just put into the "savings rate"

Fantastic article indeed Tentickles.

I had a thought and maybe someone could tell me if this could work at least technically.

Lets say the public, meaning the average joe and jane pulls out completely from the market. It drops X amount.

Could the megacorps simply buy and sell each others stock to each other, therefore perpetually keeping the market afloat at the lower market level?

I was wondering if this is already going on because the markets just don't reflect any of the real economic data.

Especially after reading about how 5 stock float 70% of the stock market.

All told, High Frequency Trading Programs HFTPs control 70% of trading volume on the NYSE.

However, at this point, five stocks (yes only five) account for 40% of the trading volume on the market. Those five stocks: Citigroup, CIT Group, Fannie Mae, Freddie Mac, and AIG. Think about that, five stocks out of several thousand, are accounting for 40% of ALL trading.

www.abovetopsecret.com...

s/f as usual



[edit on 2-9-2009 by warrenb]

That's my take on it, Warren. We've seen a supposed bull market the past 6 months (according to the MSM) but the volumes have been scraping the bottom of the barrel. Also, we've seen the corporations which have taken the most in tax payer handouts being by far the most active in the market.

I haven't said this on here before, and it might be a crazy idea with no merit, but I'm starting to believe these propped up corporations weren't in as much danger as we were lead to believe. I'm thinking maybe they had some legitimate issues, just enough to at least make a bailout "plausible" and were then used as middle men by the Federal Reserve to redistribute tax payer dollars to Wall Street and prop up the entire system of money laundering the Fed lives off of while creating the least public outrage. Yes, there has been a lot of outrage, but ultimately the average citizen has capitulated and allowed this theft to occur, whereas had those tax dollars just been handed over directly to Wall Street and the hidden banks without any plausible explanation or without the supposed crisis they created, all hell would have (hopefully) broken loose.

I think that's a huge factor in the idea that auditing the Fed would colapse the system. It wouldn't so much be a case of how much money the Fed has laundered as it would be a case of suddenly finding a paper trail which could lead to the ultimate recievers of that (our) money.

As far as the OP, they'll start talking about deflation in DC soon enough. It will be phantom deflation, used to excuse the hyperinflation they will be forced to crush us all under to cover the deficits these charlitans are running up. There is no way in hell the dollar can suffer from deflation when we've got an adminstration which has essentially built more federal debt in 6 months in office than any of his predecessors built in any single term there. No freaking way.

reply to post by warrenb


Great question Warren, that's pretty much what has been happening.

Here's a Market Ticker talked about it around the 24th I think might go checking his archives. (Sorry my internet is too slow to run two pages right now)

reply to post by Tentickles


We have had deflation of the Real Economy since 2007 when we had net economic loss.. since mid 2008 we entered a more severe Deflationary Spiral.. which there is no end in sight.. this is of the Real Economy, wage growth, job losses, consumer spending, and retail sales all indicating severe deflation ...

The deflation was so bad, even with the gov pumping trillions into the market, we still suffered net deflation across all sectors of the economy.

Imo, this guys a little late for the show..

reply to post by warrenb


Considering the money is only a printing press away............oh, wait that was early 20th century........... Okay, considering the money is only a few keystrokes away in the Fed's system; I am absolutely confident that is what is occurring.
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tents, star, and flag for a good article. I believe it'll be Hyper Inflation; as You already hinted at. Imho, We are already seeing the beginnings of it.