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Title: «Back The Inflation-Deflation Debate—What Lies Ahead?
Source:
Kitco News
URL Source: http://outlook2012.kitco.com/blog/- ... p_lifecycle%3D0%26p_p_state%3D
Published: Dec 15, 2011
Author: Debbie Carlson
Post Date: 2011-12-22 18:37:04 by Mad Dog
Keywords: F, Y, I
Views: 4527
Comments: 12
Inflation-inducing scenarios loom over the global economy as 2011 eases out and 2012 slips in, but how all the elements come together in the next few months will be a key to just how high prices rise and how long they stay there. As the close of the year, the U.S. continues to limp along at a very slow growth rate. Consumer prices in the U.S. picked-up in recent months, with headline inflation surging mid- year . And, the U.S. Federal Reserve is heading into its third year of a near zero-interest rate policy. What are the risks for additional inflation? Could the record levels of liquidity pumped into the financial system from the U.S. Fed ultimately create massive inflation ahead? Or, on the other side of the coin, with the U.S. slow-growth scenario still concerning economists, is deflation actually a risk here? On a global front, economists note that a sort of "two-track" inflation outlook is arising—with emerging economies showing rising levels of inflation, while advanced economies remain on a slow inflation track, primarily due to low growth. A primary focus is on the U.S., with economic forecasts for the 2012 and what this could all mean on the inflation/deflation front. U.S. GROWTH OUTLOOK When considering an inflation or deflation outlook, one must first take a look at overall growth prospects. Some economists say that the eurozone may actually already be in a recession. Meanwhile, recent U.S. economic data has posted marginal improvement, though overall growth remains lack-luster and below trend. After posting a 3.0% GDP rate in 2010, the U.S. is on track for an estimated 2011 growth rate of 1.7%, according to Credit Suisse. Looking ahead into 2012, Credit Suisse forecasts a 2.1% GDP pace. Not recessionary, but certainly not strong growth either. Looking at consumer price index data, 2010 saw the U.S. post a 1.6% year-over-year CPI reading. In 2011, however, that is estimated to show a spike higher to a 3.2% annual rate, according to Credit Suisse. Into 2012, Credit Suisse forecasts moderation back to the 1.7% level for CPI for the year. However, looking at the core rate of CPI, which excludes food and energy, that also saw a bump up from a 1.0% level in 2010 to an estimated 1.7% reading for 2011. That is forecast to continue edging higher to 1.9% in 2012, according to Credit Suisse. What caused the bump up in core inflation in 2011? "A year ago we had just come through the period with the lowest 12-month core [CPI] rate since 1960," said David Resler, chief U.S. economist at Nomura. "In the past year, it has accelerated by a full percentage point. However, much of it was driven by temporary factors," he said. INFLATION BOOSTERS Resler pointed to the "sharp acceleration in new and used vehicle prices" as one factor supporting the bump up in core inflation in 2011. "That happened just after the tsunami hit Japan. When you have a big reduction in supply, prices usually go up," Resler said. However, he noted that vehicle prices have already started to come back down. Another factor bolstering the core rate of inflation is the "pass-through effect of [higher] energy prices. That too is likely to prove temporary," he said. Finally, a third factor sparking higher inflation levels was that the "mortgage and housing crisis has created a big surge in demand for rental properties. House rents have been rising," Resler said. Overall, however, Resler sees muted inflationary pressures ahead. "Most of the things that caused the core inflation are already reversing or will begin to reverse," he said. Nomura estimates that core CPI inflation will total 2.1% in 2011, but then drop back down to 1.4% in 2012. Asha Bangalore, senior vice president and economist at Northern Trust Bank agreed with Resler's view. "Demand is not robust [enough] to ignite higher inflation —overall and core. Given the fact that the EU is most likely to experience a recession, Brazil, India, and China are experiencing weakness, and Japan has its own challenges, world demand for commodities is not likely to translate into rising prices. With respect to the core CPI, housing is the largest component. Housing costs are moving up but there is no major threat of inflation," she said. WEAK LABOR MARKET The U.S. Federal Reserve, with its dual mandate to contain inflation and promote employment, is not currently concerned about inflation, Resler said. "The issue for the Fed is the unemployment rate." While the overall U.S. unemployment rate has dipped down slightly to the 8.6% level towards the end of 2011, it saw a mid-year push above the 9.0% level, uncomfortably high for the U.S. In fact, the weak labor market may be a key factor holding inflation down in the months ahead in the U.S., some economists said. "Wages are barely growing," said John Lonski, chief economist at Moody's Capital Markets Group. In fact, he sees stagnant wage growth in the U.S. ahead. "It's going to be difficult to significantly reduce unemployment without a softening of wages. You are going to have a reduction in real average wages in order to reduce unemployment substantially," Lonski said. This type of scenario simply doesn't offer businesses any pricing power to increase the cost of goods. "I don't see it [inflation] getting much faster. When you have such high unemployment, businesses have the ability to keep wages down. Businesses can't raise prices," said Jeff Rosen, economist at Briefing.com. "There's nothing on the horizon that suggests inflation will be rising." However, Rosen conceded that headline inflation or the rate that does include food and energy is vulnerable to a pop higher in 2012. "If we seen another shock in food or another Arab Spring event, we could see prices move up," he warned. HYPERINFLATION THREAT? Some market watchers, however, have highlighted concerns about inflation or even hyper- inflation in the wake of the U.S. Fed's massive stimulus programs, which included quantitative easing and QE2. Critics of the stimulus warned this could ultimately result in high inflation down the road once the U.S. economy rebounded. In fact, part of the current slow growth problem is that banks are not lending and there simply isn't demand for borrowing right now, economists said. Businesses are hesitant to borrow with all the current economic uncertainty swirling around. So, the additional liquidity from the Fed simply isn't roiling around in the financial system right now. "As long as banks hold excess reserves and are not extending credit, inflation is not a concern. It will be worrisome if bank start lending at a strong clip," said Northern Trust's Bangalore. "The worry is that if the economy reverses back and banks snap their fingers and start lending again, there is a lot of available credit and liquidity. There is a risk that a lot of money could enter the system really quickly," said Briefing's Rosen. But, that is "contingent on the economy turning around and growing really quickly, which doesn't seem likely," he added. Even if it did, Rosen believed the Fed could contain that situation. "If that were to happen, the Fed could just tighten the screws to limit liquidity and limit the extra money supply," he explained. THE OTHER SIDE OF THE COIN It wasn't too long ago that concerns about a Japan-like deflationary spiral were circulating about the U.S. economy, are those worries now in the rear view mirror? "Deflation is not a concern, the economy is growing and Fed has succeeded in turning the tide here," said Northern Trust's Bangalore. However, others remain wary. "You can't rule it out. There was a risk of that a year ago," said Beth Ann Bovino, deputy chief economist at Standard & Poor’s. Core CPI fell to a 0.6% level in the fourth quarter of 2010. What exactly is deflation? Bovino offered this definition. "If everybody saves, nobody spends, businesses don't hire, products don’t get sold and prices fall further and further," she said. Japan became mired in such a scenario during the 1990s and as the Bank of Japan discovered deflation is a hard nut to crack. Economists actually say that central banks have more policy tools at their disposal to tackle rising levels of inflation as opposed to falling levels of deflation. While some critics may wonder about the impact that QE2 had on the U.S. economy, Bovino calls it a success story merely because "it was very helpful in preventing the U.S. from falling into a deflationary spiral." Overall, economists appear to be more concerned about the potential for deflation on the horizon, than actual inflation in the U.S. "We don’t see this [deflation] as a likelihood but there is some potential," said Nomura's Resler. What factors would need to unfold to spark actual deflation? Resler said "it would probably take another retreat into recession." Moody's Lonski added that in the U.S. currently, "real wage deflation is underway. That presents a risk for consumer spending and housing. If we are going to have a severe market disruption in the next 12 months it is much more likely to be because of price deflation than price inflation. The 1970s are not likely to recur anytime soon," he said.
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#1. To: All (#0)
Sounds about right. For at least a starting point for ALL Americans. It's called a middle class. BUT FIAT away gurls! Stagflation as a THREAT to the everyday lives of regular folks. Can I pleeeeze "own" some gold/guns/ammo/meat/transportation/animals/plants/light bulbs/toilets/land/house/boat/plane/cats/frying pans/knives/baseball bats/pen/pencil/typewriter/PC/etc./etc./etc./etc./infinitum master? LOL! SUCKERS!
Spoiled, stupid and ignorant, brain dead phuckwads, libTURD fools, tools, and idiots, are the real sickness; the messiah "king" obammy and his regime are only the symptoms.
There is no debate. Government's all over the world are pumping trillions of dollars into the economy. We will see a massive burst of inflation at some point.
Trying to reason with him is like trying to argue with a barking dog...... Oh.... Ummm...... Never mind.
“Contemplate the mangled bodies of your countrymen, and then say 'what should be the reward of such sacrifices?' Bid us and our posterity bow the knee, supplicate the friendship and plough, and sow, and reap, to glut the avarice of the men who have let loose on us the dogs of war to riot in our blood and hunt us from the face of the earth? If ye love wealth better than liberty, the tranquility of servitude than the animated contest of freedom, go from us in peace. We ask not your counsels or arms. Crouch down and lick the hands which feed you. May your chains sit lightly upon you, and may posterity forget that you were our countrymen!” -- Samuel Adams --
I know, but it's not about him. I have to respond to help educate others!
. Hey MORONS, I've been talking about the purposeful INFLATION of our FIAT money system since day one. MORONS. I didn't WRITE the piece MORONS, I just posted it MORONS.
Spoiled, stupid and ignorant, brain dead phuckwads, libTURD fools, tools, and idiots, are the real sickness; the messiah "king" obammy and his regime are only the symptoms.
SURE, dummy, sure.... Please post links to other articles that you've posted, where this issue has been raised? How many years will you have to go back, to find (say) three? Feh.
“Contemplate the mangled bodies of your countrymen, and then say 'what should be the reward of such sacrifices?' Bid us and our posterity bow the knee, supplicate the friendship and plough, and sow, and reap, to glut the avarice of the men who have let loose on us the dogs of war to riot in our blood and hunt us from the face of the earth? If ye love wealth better than liberty, the tranquility of servitude than the animated contest of freedom, go from us in peace. We ask not your counsels or arms. Crouch down and lick the hands which feed you. May your chains sit lightly upon you, and may posterity forget that you were our countrymen!” -- Samuel Adams --
. I don't have any need or desire to prove F all to YOU CULT boy. So, piss off, you stupid vile gibbering CULT boy beeeyach. Do your own leg work loser, you could use the exercise you fat azzed CULT boy beeeeyach.
Spoiled, stupid and ignorant, brain dead phuckwads, libTURD fools, tools, and idiots, are the real sickness; the messiah "king" obammy and his regime are only the symptoms.
. BTW erica you appear to be LOSING it. Get a GRIP CULT boy. I always knew we disagree on some things so what? But even though I knew that you are WRONG about some things such as RonniePaulie being the SAVIOR of the US CONSTITUTION, I never considered you to be just dishonest or chickenshit mean spirited. So now we all know that while you are crying about your wee hero FRAUD's FAILURES you say things that you KNOW are LIES about me. HONESTY is either in you or it is not. IT does not matter what you think of the people you are dealing with CULT boy. It makes me sad to learn that you are just another dishonest liar. BUT it's ALWAYS best to know whatever the truth IS. And unfortunately the truth is that you CULT boy are a dishonest simpleton FOOL. You are a PITIFUL lying loser. RonniePaulie will NEVER, EVER; be elected President of the USA. AND YOU are too stupid to see that it isn't RonniePaulie I object to as much as I object to the craven credulous CULT of PERSONALITY that you FOOLS have established around him. It's UN-AMERICAN, anti-LIBERTY, and just plain STUPID. The man is a F' ing CAREER POLITICIAN you gibbering FOOL! Man you are pitiful. LMAO!!!!!!!!!!!!! Have a NICE day CULT boy.
Spoiled, stupid and ignorant, brain dead phuckwads, libTURD fools, tools, and idiots, are the real sickness; the messiah "king" obammy and his regime are only the symptoms.
ME: SURE, dummy, sure.... Please post links to other articles that you've posted, where this issue has been raised? dummy: don't have any need or desire to prove F all to YOU CULT boy. Translation: "I can't prove shit." CHECK-MATE!
“Contemplate the mangled bodies of your countrymen, and then say 'what should be the reward of such sacrifices?' Bid us and our posterity bow the knee, supplicate the friendship and plough, and sow, and reap, to glut the avarice of the men who have let loose on us the dogs of war to riot in our blood and hunt us from the face of the earth? If ye love wealth better than liberty, the tranquility of servitude than the animated contest of freedom, go from us in peace. We ask not your counsels or arms. Crouch down and lick the hands which feed you. May your chains sit lightly upon you, and may posterity forget that you were our countrymen!” -- Samuel Adams --
Yeah, it's so RUDE of me, to see if you'll back up your words, or if you'll just try to BS your way out of a lie... LOL. "Better put some ice on that."
“Contemplate the mangled bodies of your countrymen, and then say 'what should be the reward of such sacrifices?' Bid us and our posterity bow the knee, supplicate the friendship and plough, and sow, and reap, to glut the avarice of the men who have let loose on us the dogs of war to riot in our blood and hunt us from the face of the earth? If ye love wealth better than liberty, the tranquility of servitude than the animated contest of freedom, go from us in peace. We ask not your counsels or arms. Crouch down and lick the hands which feed you. May your chains sit lightly upon you, and may posterity forget that you were our countrymen!” -- Samuel Adams --
CHECK-MATE! Tell ya what CULT boy; why don't you find me supporting FIAT monetary systems over Gold/bi metallic standard systems, anywhere anytime? Then I'll PAY STONE/LF a HUNDRED DOLLARS IF YOU CAN CULT boy. But IF YOU CANNOT DO THAT, (and you CAN'T CULT boy because I've NEVER done such a thing), YOU pay STONE/LF a THOUSAND DOLLARS. I won't ask you the question "No BALLS CULT boy?", because we all already know that YOU have no BALLS erica. Now piss off erica.
Spoiled, stupid and ignorant, brain dead phuckwads, libTURD fools, tools, and idiots, are the real sickness; the messiah "king" obammy and his regime are only the symptoms.
LOL! No CULT boy, it's rude of you to be a LYING PIECE OF PaulTard SH!T. But that's what you gibbering PaulTards DO isn't it CULT boy? Mentioned only as an illustration to the lurkers still learning the pathology of the typical deranged deluded PaulTard LOSER. It's OLD news to the rest of us CULT boy. ROTFLMAOAY!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Spoiled, stupid and ignorant, brain dead phuckwads, libTURD fools, tools, and idiots, are the real sickness; the messiah "king" obammy and his regime are only the symptoms.
What exactly is deflation? Bovino offered this definition. "If everybody saves, nobody spends, businesses don't hire, products don’t get sold and prices fall further and further," she said.
#2. To: Mad Dog (#0)
Back The Inflation-Deflation Debate—What Lies Ahead?
#3. To: jwpegler (#2)
#4. To: Capitalist Eric (#3)
#5. To: jwpegler, Capitalist Eric (#2)
#6. To: Mad Dog (#5)
Hey MORONS, I've been talking about the purposeful INFLATION of our FIAT money system since day one.
#7. To: Capitalist Eric (#6)
#8. To: Capitalist Eric (#6)
#9. To: Mad Dog (#7)
dummy: Hey MORONS, I've been talking about the purposeful INFLATION of our FIAT money system since day one.
#10. To: Mad Dog (#8)
I never considered you to be just dishonest or chickenshit mean spirited.
#11. To: Capitalist Eric (#9)
Translation: "I can't prove shit."
#12. To: Capitalist Eric (#10)
blah blah blah
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