[jasonraymondson]

Unlimited Funds, Super Inflation, Death to America.

We could have had a painful crash, that we would have recovered in 5 - 10 years. Now we are going to get raped so hard, that I don't think we will ever recover.

The mad max type shit has been assured. This crap is going to get us through the next couple years. After that... DOOOOOOOMMMM!!!!!!!! X infinity

[kpeavey]

At least you have provided us a time frame with which to work.

[TreebeardsUncle]

Yep.

That sounds about right. The s*** is going to hit the fan.

Sounds like it is time for folks to head to the hills and go hide out in their bug-out shelters lest they be overun by zombie hordes and mad maxers. Go grow rudebagas, oil your g*ns, and milk your cows. Maybe the Amish will let you in.

Seriously, the governments had to inject capital into the banks and guaranty interbank lending to make up for their insolvency. The alternative was a collapse of the financial system. This has put the chances of GDII way down. Inflation is not an issue now. There is just too much credit in the system.

On another note, the reductions in interest rates, and massive capital injections should deflate the currency, set us up for another flight to commodities starting by this spring, and lead to my recently purchased oil service stocks soaring nicely by the end of June.

Lates.
g

[mwellermd]

Unlimited Funds, Super Inflation, Death to America.

We could have had a painful crash, that we would have recovered in 5 - 10 years. Now we are going to get raped so hard, that I don't think we will ever recover.

The mad max type crap has been assured. This crap is going to get us through the next couple years. After that... DOOOOOOOMMMM!!!!!!!! X infinity

The availability of unlimited funds is exactly what the fed and the entire world should be doing right now. That and cutting interest rates and lowering taxes. Deflation is what is now ocurring and the economy is seizing up. It's not the death of America though.

The future outlook is less rosy. We'll have a relatively short term recovery which will increase oil demand. Then it's hyper inflation because the cost of most everything is tied to oil prices. That normally gets solved by reducing the money supply, raising interest rates and raising taxes. That recovery attempt probably won't work too well with a continually decreasing supply of oil. Then at least there will be great discomfort in the world, but hopefully not the end of it.

[WyoDutch]

What? Me worry?

[vtsnowedin]

Yep.

Seriously, the governments had to inject capital into the banks and guaranty interbank lending to make up for their insolvency. The alternative was a collapse of the financial system. This has put the chances of GDII way down. Inflation is not an issue now. There is just too much credit in the system.

On another note, the reductions in interest rates, and massive capital injections should deflate the currency, set us up for another flight to commodities starting by this spring, and lead to my recently purchased oil service stocks soaring nicely by the end of June.

Lates.
g

My last economics class was in 1975 if you don't count 33 years of life lessons, so I may be a bit confused but I think you have it backwards. Injecting lots of cheap money into the economy will cause inflation not stop it. The deflation if any will come when the bill comes due and they have to raise taxes.

[Quinny]

I think he said deflate the currency.

Yep.

Seriously, the governments had to inject capital into the banks and guaranty interbank lending to make up for their insolvency. The alternative was a collapse of the financial system. This has put the chances of GDII way down. Inflation is not an issue now. There is just too much credit in the system.

On another note, the reductions in interest rates, and massive capital injections should deflate the currency, set us up for another flight to commodities starting by this spring, and lead to my recently purchased oil service stocks soaring nicely by the end of June.

Lates.
g

My last economics class was in 1975 if you don't count 33 years of life lessons, so I may be a bit confused but I think you have it backwards. Injecting lots of cheap money into the economy will cause inflation not stop it. The deflation if any will come when the bill comes due and they have to raise taxes.

[Stratovarius]

Ya, what vtsnowedin said. An increasing money supply causes prices to rise. Lol @ Yugoslavia. I believe at one point when they had 37% inflation per day they had something like a 500 bil dinar note.

One way a deflation could happen is a fall in money supply which causes less lending which causes a further drop in money supply (because money is loaned into existence!) which causes demands for all sorts of goods to halt.

The availability of unlimited funds is exactly what the fed and the entire world should be doing right now. That and cutting interest rates and lowering taxes.

"Unlimited funds"...Go easy, we don't want 2 trillion % inflation like in Zimbabwe.

How are we going to get around an exponentially increasing money supply? The huge gap in national income versus debt load? We don't have an "unlimited" future.

[davep]

So is now a good time to be buying those NYMEX option calls for Dec 2011 at 4.32?

[vtsnowedin]

Exactly. An inflated currience buys you less goods and services then the currency at the starting point. During the Carter years 15% inflation meant that each year you wages bought 15% less per dollar than the year before while your wages only rose 9% per year if you were lucky. You lost purchasing power each year but it made sence to buy on credit and pay it off with the inflated dollars you would earn in the future. In effect the cost of somthing bought on credit was the price plus interest minus the inflation rate.
Now in the housing market we have the opposite, deflation. A 100K will buy 25% more house today than it would a year ago. The owners equitity has lost 25% in value and the equity the morgage holder has also lost 25% on paper. So the cost of a house is the price plus the interest Plusthe deflation rate.
Now throw in that while housing , the major asset in most peoples net worth is deflating ,the price of oil and other commodities was inflating. Now you have confusion about how much your money is worth today and no idea about what it will be worth tomorrow.
The bad news is that the suits in charge seem to be as confused about which way to go as I am and that dose not leave me feeling all warm and fuzzy.

[Stratovarius]

Now throw in that while housing , the major asset in most peoples net worth is deflating ,the price of oil and other commodities was inflating. Now you have confusion about how much your money is worth today and no idea about what it will be worth tomorrow.

Don't worry, your money will be worth more tomorrow, but then worth nothing the day after that.

Inflation will catch up with momentary deflation.

[retiredguy]

I'm no economist, but the deflation we are experiencing now seems like a natural response to the credit binge of the past 30 years.

From what I'm seeing, people are now buying houses, at least to some extent, again. Of course they are paying prices for those houses that are much less than the asking price.

Isn't that what is supposed to happen? Home prices are vastly overinflated and need to be reset. The market is doing that right now.

Will there be pain and suffering. Of course. But what is the alternative? To create even more debt to artificially prop up home values? Where does that take us? I have an idea and don't think it is a place I would like to be.

[Snowrunner]

I think the problem with the way the "world" reacts is that they are fighting the crisis of 1929, they took lessons from then and try to apply it now, add to that the political need to keep people at least (for a while) the feeling they are save and you end up with the current scenario.

IMO (and I am not an Economist, but seriously, that just means I don't ready tea leafs), the smarter way to do things would have been to spin all the debt off from the different banks into their own entity, then consolidate the "debt free" banks into a handful of healthy institutions, this way people knew where they could have put in their money.

Of course the side effect would have been that most stocks would have been eventually worthless and quite a few companies would have gone the way of the DoDo, but it would have cleaned the slate and at least allowed everybody to figure out where they were standing and what needed to be done.

The whole thing is so messed up and intertwined that nobody has a clue really what is going on in the markets, I think in the last three months for the first time in a very long time most banks took a serious look into their books and realized just how naked they were really standing in the rain.

What the current "strategy" does is trying to smooth over roadbumps when we are without a road and in the meantime making things worse for everybody, even though they delayed the inevitable for a few days or weeks.