Severe deflation? What deflation?

So, everyone is talking about "deflation" now. Apparently, over the last two or three months, the CPI index has fallen by some percent per
month.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aO7c6xGhqqf0
``The cost of living dropped 1.7 percent last month (November), more than economists had forecast, a Labor Department report showed in Washington.''
So all the talking heads are now talking about "deflation".
But let's look a little further.
``Excluding food and energy, so-called core prices were unchanged from a month earlier.''
We are coming off a huge price crash for commodities such as oil and steel, with crude prices dropping by some three times. Stock market and housing also experienced a price crash. And that left core prices unchanged.
What this means is that the Fed's money printing machine is pumping so much money that even these huge asset shocks did not decrease the core CPI. The supposed "deflation" is a simple reflection of a crash of the commodity bubble.
WHat does it mean going forward?
1) Commodities do not have much room to fall further
2) The money printing will continue unabated, as it should with "zero to quarter percent" Fed target rate.
3) Fewer goods are to be produced due to continuing economic recession.
So, more money, chasing fewer goods, without the cushion of the continuing commodity price declines, is going to mean that we'll experience inflation.
It may take a while for the talking heads to catch up.
Inflation may be the best way out of this, which I am not fully convinced is correct, but in any case, I think that it is coming in a big way.
In broader terms, this is a continuation of the process of "imaginary wealth" disappearing from us. Due to borrowing, and its effects that were not apparent, we thought that we were wealthy, whereas in fact the wealth was in part based on continued borrowing.
The correction of this imaginary wealth was that first house prices fell, then stocks, and now the value of the currency.
I liken this with being on an ice floe when ice is breaking and you have to jump from one floe to another.
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Nope, we were talking about metal. Wrong group?
Vaughn
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Vaughn Simon wrote:

I'm waiting for the price of a 20' steel cargo container to deflate to a price I'm willing to pay... I haven't seen much change yet.
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Pete, I have here in Europe. At least 20%, perhaps more. Steve

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"Pete C." wrote:

The price may go up instead. There aren't as many new refrigerator boxes available for the homeless, these days.
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Gunner Asch wrote:

I was talking to the pastor of a local church this morning. Someone backed a big car into their concrete block pump house & storage building. It will likely have to be torn down and replaced. I suggested that they buy a couple shipping containers to block off the back side of the property, so people can't use their parking lot as a shortcut and cause similar damage. They had 1/2" steel cable anchored between pieces of used power poles for a rear and side fence, but the rednecks just ripped them out. I doubt they can move fully loaded 40' containers. It will be even harder if they are joined, back to back. :)
We are a little over an hour's drive from a holding area in Tampa, Fl. so the transportation cost won't be as bad as to some places. Al they have to do is talk the zoning people into it, claiming that it's not only a fence and storage facility, but corrects part of the parking problem by removing the old building from the center of the rear parking lot. It wouldn't be hard to dig a shallow pit for the well pump, and move the water tank to the rear of the church building.
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wrote:

A few nuts and bolts and a complete redesign and you could have flat-pack containers :-)
Mark Rand RTFM
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Mark Rand wrote:

How would you get them to meet DOT regulations?
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On Fri, 26 Dec 2008 16:34:31 -0500, "Michael A. Terrell"

Either torque them up well or change the regulations...
I'm trying to save the world here, not meet the bloody regulations :-)
Mark Rand RTFM
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Mark Rand wrote:

Then you are willing to let them stack the new version 25 high, next to your house?
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On Fri, 26 Dec 2008 21:01:31 -0500, "Michael A. Terrell"

Have you ever though that most sky scrapers are held together with nuts and bolts?
:-)
Mark Rand RTFM
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Mark Rand wrote:

Have I ever through what?
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Mark Rand wrote:

Have you ever seen a sky scraper driven down an Interstate highway?
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These toxic obligations may well prove to be a boon for the recipients. They may be worth more than we assume. We'll see who has the last laugh.
i

http://consumerist.com/5113555/credit-suisse-top-execs-get-toxic-debt-as-christmas-bonus
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I'm wondering if this will be a gold mine or the elevator shaft. Very mixed emotions but I like it!
Wes
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On Fri, 26 Dec 2008 12:21:55 -0800, the infamous Gunner Asch

Hell, the gov't should have bought all those for use by Katrina victims.
So, where can you buy 20-footer for a dirt-cheap price, including delivery to zip 97526? they want $4,000 for a professionally refurbished (aka: newly spray-painted) one here in GP. Feh!
-- We should take care not to make the intellect our god; it has, of course, powerful muscles, but no personality. -- Albert Einstein
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On Fri, 26 Dec 2008 20:22:53 -0800, the infamous Gunner Asch

Yuppers, you prolly could. Where'd you buy it?
-- We should take care not to make the intellect our god; it has, of course, powerful muscles, but no personality. -- Albert Einstein
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17646.invalid> wrote:

Practically everyone will lose if we get into a deflationary spiral. Read the post George made today. Or read any good economic history, particularly of the Great Depression.
There are few things more devestating to an economy than a deep deflation. It screws up banking and credit, it makes investments problematic, and, worst of all, deep ones always are the result of soaring unemployment. Then the deepening deflation feeds more unemployment into the system.
Most of the people who benefit from deflation are retired people living on a fixed income.
As for Iggy's example, the gas and food price declines are important parts of the economy. There's no reason to exclude them when calculating inflation or deflation. Their prices have declined for the same reason the economy is slowing down and the same reason that will lead to further deflation if it isn't stopped. There is no reason to believe that commodity prices don't "have much room to decline further." If demand continues to fall, their prices will continue to fall.
The balance between money and demand is high because demand is falling, not because there was too much money around. The Fed will try to dry that up with open-market transactions, selling bonds to absob currency as needed, just as they did last week. But for now, they'll probably let the ratio run a little high as a counterforce to deflation. In other words, they'll be trying to inflate rates with open-market monetary actions, because they're out of room to do so by lowering interbank interest rates, and the Fed has nothing to do with fiscal policies such as spending stimulus. They have to leave that to Congress and the president.

Not in economics. Our GDP has gone up, on the average, for over 200 years. And it can take a decade before that which goes down may come up, as it did in the 1930s.
And, as John Meynard Keynes once said, in the long run we're all dead.
-- Ed Huntress
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Ed Huntress writes:

Only in Keynesian theory, which was supposedly put to sleep by the Reagan era, which in turn led to decades of prosperity. Now the current upheaval seems to have opened a Keynesian revival without much of a public debate.
Balanced budgets, sound money, free trade, and laissez-faire policies were all thrown out and replaced by Keynesian sophistry from the Great Depression until Reagan. That lasted until 2000, when GWB talked conservative but acted Keynesian. Now Obama and the Dems will complete this change: all talk and action henceforth shall be pure Keynesian.
I'll bet Ed even believes in the ultimate Keynesian sophistry, the "paradox of thrift", which says that if people save more and consume less, there is--please forgive my unsophisticated understanding--more saving and less consumption. Somehow this is held to prove that saving is bad, and deflation is worse because it potentiates savings.
"Perhaps the single most destructive tenet of Keynesian economics was its denigration of saving. Keynesianism has been used to justify wasteful spending, massive deficits, and one after another scheme to redistribute wealth from those who would save it to those who would spend it."
-- http://www.cato.org/pubs/journal/cj16n1-7.html
Keynesian economics is popular because it makes government and academics into the only possible saviors of society, and justifies government handouts that win elections for incumbents and "change".
And most of what Ed sez is right out of Keynesian theory. Including the part about denying it is Keynesian, which is its key characteristic of volubility, simultaneously meaning anything or nothing, like Marxism or evolution. All materialist ideas that should have stayed dead in the 20th century.
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