Caffeine wrote:Wouldn't these constant bailouts of banks and corporations, as well as the possibility of foreign nations ceasing to use the USD, result in hyperinflation/currency collapse rather than deflation?
Example: A large percentage of US oil is imported from other countries. What happens if oil-producing countries were to cease accepting dollars for oil?
Other examples: imported rice, imported fruit, manufactured goods, etc.
I wouldn't be surprised to see deflation in the prices of "unnecessary" goods, but I would not be at all surprised to see food price inflation, as one example.
Ordinary people are unlikely to be able to afford oil products AT ALL within 5 years
Price rises in such great world staples as wheat, cotton, rubber and copper have been as thoroughly publicized as the Roosevelt bull market. But the world is full of a number of things just as important to industrial civilization as staples. For a broad view of commodities the businessman leans on the big wholesale price indices, typical of which are those computed by Dun & Bradstreet, the Department of Labor and the Annalist, financial weekly published by the New York Times. Last week a 23-year picture of these indices looked like this:
1914 1920 1925 1933 1937
Jan. Jan. March March Jan.
Dun's . . . . 124 247 202 128 207
Annalist . . 98 233 161 82 139
Labor . . . . 60 158 104 60 85
Over long periods these indices reflect the totality of commodity price changes, but they often lag in revealing price trends over periods of less than a year. For daily distribution by the United Press, a more responsive index is compiled by Dun & Bradstreet from the spot prices of 30 basic commodities. This roster of prices (with 1930-32 as 100) was at 68.51 in March 1933, at 129.96 last October, and by last week was up to 144.62. The Associated Press compiles its own index of 35 commodities for its member newspapers. From a depression low of 41.44 (February 1933) the AP index last week had risen to 90.42.
Stoneleigh wrote:A simple dollar devaluation does not equal inflation. Inflation would require the expansion of money and credit in comparison with available goods and services. If credit contraction far outweighs the effect of dollar devaluation, then the net effect is still contraction of the effective money supply. Credit only functions as a money substitute during expansion. It's evaporation once this expansion ends is what leads to money supply collapse.
IMO we will see beggar-thy-neighbour devaluations in many places, and the floating currency regime will dissolve into chaos. Before that we will see the dollar appreciate as dollar-denominated debt deflates. As there is more dollar denominated debt than any other kind, its deflation will force the dollar up temporarily (perhaps for another year).
People associate unaffordable prices with inflation, but deflation can produce the same result far more abruptly, as purchasing power falls faster than price, meaning that prices rise in real terms.
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