Monday, October 27, 2008
Deflating graph of the day
The market is implying annual deflation of 5% in CPI (headline) over the next two years. Mind you, there are no post-war periods of ten years or more with inflation less than 2%.
For reference, here is a long term plot of year-over-year CPI change.
6 Comments:
By 
, at
Mon Oct 27, 09:57:00 AM:
Be afraid. Be very afraid. All assets will decline in value, from houses and cars to financial assets. Tax revenues will decline, tempting the crazy, nutty Congress to begin chasing the tail of ever declining revenues with ever higher marginal rates. Expectations for deflation, combined with expectations for higher taxes can mean only a loss of economic productivity on an enormous scale. We are in deep doo-doo.
By 
TigerHawk, at
Mon Oct 27, 12:38:00 PM:
If you think that being in debt sucks now, just wait until you experience it during deflation.
That said, the government printing press is running at very high speed. Are we going to go from deflation to inflation in a hideous whipsaw during Obama's first term?
By , at
Mon Oct 27, 12:57:00 PM:
Yes, we can!
Let's put FDR back in charge (no, not that FDR, this one). He did so much for the economy in his first go-round, as the invaluable aid to Chirs Dodd, Barney Frank, and the collection of jolly misfits running Golden West Financial, Countrywide and Bear Stearnes.
By , at
Mon Oct 27, 02:35:00 PM:
http://business.timesonline.co.uk/tol/business/economics/budget_2008/article3517108.ece
Im not sure I agree that there is deflation... Name one staple that is going down?
Inflation will solve a lot of problems, housing issues not the least of which
Col M
By , at
Mon Oct 27, 02:38:00 PM:
Houses. Cars. Want more? Stocks. Gold. Copper. Oil.
By Who Struck John, at
Mon Oct 27, 07:37:00 PM:
The government printing press is running full speed, but the deflation as leveraged positions are unwound is far, far greater than the amount the government is putting into the market. Hence, deflation is what we are getting, with a vengeance.
Central banks have forgotten (at their peril) that deflation is harder to fight than inflation. Just ask the Japanese.
