Deflation 101 slide deck
Jan 19th, 2009 by msurkan
This is the presentation to accompany the “deflation 101″ podcast. Learn why the world is experiencing deflation, and why it will persist for a long time. You can also download the podcast of the audio presentation to accompany these slides.
Nice collection of charts!
Make sure to listen to the podcast that accompanies this slide deck too. It really ties all the charts together and gives a coherent overview of what they all mean.
heh heh.. you deflationista types are going to have a rude awakening once hyperinflation kicks in. That cake is already baked -
http://www.safehaven.com/article-12403.htm
I’ll give Mish another year or so before he has to shut down his blog due to lack of credibility.
I like your analysis though..just don’t agree with your forecast or definition of deflation.
Al
Al wrote: “you deflationista types are going to have a rude awakening once hyperinflation kicks in”
Interesting… So far, it’s the inflationists who are having the rude awakening. A year ago the inflationists were SO certain that oil prices would just keep heading to the moon.
I also take comfort in the fact that there are only a handful of deflationist believers out there (good ‘ol Mish included). With everyone on the other side of the trade, the prospects for deflation look very good…
Al:
From the article you cite:
“Consider this example. You live in a small town in rural Texas with 10k people and 3k houses. A small local explorer discovers a gigantic new oilfield, an elephant. Within months your town’s population swells to 20k as a major oil company partners with the explorer to start developing the find. House prices skyrocket as 20k people compete for only 3k houses. Is this inflation? No, it is pure supply and demand. Its driver was not monetary in nature.”
I don’t see why the example above does not represent inflation. After 10K new people moved into town, didn’t inflation occur when increased money bid for finite goods? I would think a supply and demand issue would occur if the town water table dropped by 3 feet, and oil was never discovered. The same number of residents would be forced to conserve water based upon how much they could afford to pay for the now higher priced scarce water available.
refuting Hamilton was a piece of cake
http://globaleconomicanalysis.blogspot.com/2009/01/is-big-inflation-coming.html
Mish
Mish has been predicting deflation forever. He is a professional doomsayer. Since his first predictions of deflation, house prices in my neighborhood of Brooklyn , NY have tripled. They have since come down a little bit but will never go down below their 2002 level. For that to happen a 3 family house would have to fall in price from $900,000 to $400,000. And this is just to get to Mish’s baseline starting point.
I like your presentation of charts.
Her is an excerpt of Marc Faber from a 2005 interview.
“And I would argue in Japan we had deflation – that is true, between 1990 and recently, real estate prices went down, stock prices went down and also consumer prices went down – but in general this period of deflation in Japan was beneficial for the average household. The reason being, that it became affordable for the average household to buy goods and to rent an apartment and to buy equities. In other words, in this period of deflation in Japan we had a kind of deflationary boom, in the sense that someone who had $1000 in 1990, today, with the same $1000, can buy a much larger basket of goods. I cannot say that of the $1000 you have in the US. You cannot buy with $1000 today in the US a much larger basket of goods than you could buy in 1990, because real estate prices are much higher, stock prices are much higher, and consumer prices – if you measure them properly – are much higher than in 1990. But the deflation can have, in some countries like Japan, if it’s not a totally deflationary collapse, actually a beneficial impact on the typical household.
But of course, deflation, if you think of it, is disastrous for the rich people, because it means stock prices go down, it means real estate prices go down, so the rich class benefits the least. And as I mentioned in Japan: the rich got hit. I mean, if you look at the pattern in Japan and if you go, today, to Japan you would think that Tokyo is a boom town: you would never think that the stock market is down 70% from the highs in 1989; and you wouldn’t think that property prices are down 70% from the highs in 1989. But a normal family, their wages are the same as in 89, 90. Maybe their wages have actually even increased by 1 or 2% per annum, but they can now rent an apartment 50% cheaper than at the time; they can join a golf club for 80% less than in 1990; and they can buy consumer goods cheaper, because of cheap imports from China and so forth. So, actually, the typical Japanese household isn’t complaining about this deflation, and it’s cash money, and that you have to see.”
Do you even have any training or educational background to support what you are trying to talk about? Or are you just talking out of your ***?
Skeptic wrote: “Do you even have any training or educational background to support what you are trying to talk about?”
No, I don’t have any formal training in economics, but it is a passionate hobby of mine and I have been studying the subject for years.
Keep in mind that it’s not as if the “professionals” know what is happening. In polls the The Wall Street Journal conducted in 2007, not ONE economist who predicted an economic contraction in 2008, and none of them felt that we could experience deflation for even a short period of time.
Professionals, involved with a given industry, are often the last people to recognize when big changes are imminent. It takes outsiders to be able to see the big picture.
If nothing else, I hope my articles (and podcasts) generate a healthy discussion.
This is irrelevant: ‘Skeptic wrote: “Do you even have any training or educational background to support what you are trying to talk about?” ‘. Focus on what msurkan is saying not his formal training, which is meaningless at least in economics as we have seen many times.
why is deflation never discussed in the main business press or university education. It looks like all the so called experts who are captive to the status quo folks will dismiss this idea immediately. Like in nature aren’t there universal rules in commerce that apply also and that we as a nation can’t avoid taking our medicine. I read a bit into the 1929 depression and there are many parallels. securtization was done back then, people were suckered into living beyond their means, and yes there was deflation.
Sometimes trying to learn about business is like being in the matrix.