Are Inflation Concerns Inflated?

Are Inflation Concerns Inflated?
6/3/2009

Amid new pronouncements that inflation is a looming possibility, WSJ's Economic Editor David Wessel explains the unlikely conditions that would spur inflation in the U.S.

Consumer, production prices continue to drop in China

Consumer, production prices continue to drop

Consumer, production prices continue to drop by -- CHINA'S consumer and production prices continued to decrease in May as expected, which allowed the central bank to retain low interest rates.

Analysts anticipate the deflation will extend into August and some...

Jim Rogers: S&P Could Go to 50,000

Jim Rogers: S&P Could Go to 50,000

From The Business Insider, June 3, 2009:

Ahh, Jim Rogers, always good for a nice headline (see: above). In an interview with the Economic Times of India, the famously dramatic and bearish investor, hits on all his favorite themes, like the collapse of the West, the appeal of commodities and farmland, and of course inflation and the collapse of the dollar.

While he's negative on US assets -- he says he's gotten rid of all of his dollars, for the most part -- he advises against shorting this market.

It's a bear market rally. I was going to say I don't think S&P 500 will see new highs. But I have to quickly temper that by saying against the dollar because the S&P 500 could triple from here if they print enough money and the value of the US dollar collapses, then S&P could go to 50,000, Dow Jones can go to 1,00,000.

Which is one reason why I am not shorting stocks right now. Because there is a possibility of this sort of a thing. There is a possibility that stocks could go through unheard of levels, but would be in worthless currency. Read Article...
http://www.businessinsider.com/jim-rogers-sp-could-go-to-50000-2009-6

Do expansive federal bailout plans doom Americans to an inflationary future?

The $7 trillion question

For now, frightened investors worldwide continue to gobble up U.S. Treasury bonds, and they aren't much concerned about the impact of all the obligations the U.S. government is taking on to try and head off economic catastrophe.
But the government printing money, lending money to shaky corporations and guaranteeing debt that may never be repaid all could have troubling consequences in the not-too-distant future.

Focus on deflation
Even those who have backed the blizzard of emergency spending on the grounds that it's necessary to prevent an economic catastrophe are worried about the size of the tab that will be left to taxpayers.
An inflationary spike may seem unlikely, given that governments around the world are currently doing their best to head off the opposite threat - deflation, with falling price levels that would hamper economic growth by increasing real interest rates. The Bank of England and the European Central Bank slashed interest rates Thursday morning in a bid to bolster economic activity and prevent inflation from turning sharply negative in coming months. Read more from CNN Money...

2008 From Inflation to Deflation

Economy: From Inflation to Deflation
Stock Market: Sell Hope, Buy Despair

Outside the Box: Five Potential Surprises into Year-End

The Face of Deflation
John Riley
For the past couple of years, the Fed and Wall Street have been denying the existence of deflation. Deflation is the worst economic scenario, so it is no surprise that they turn a blind eye publicly even when they are furiously working behind the scenes to prevent it and control it.
One of the ways of denying deflation is to strictly define it only as "a pervasive and constant price decline in all areas of the economy caused by a reduction in credit available or the money supply." While this is one definition, it is not the only definition.
Deflation starts out in the corporate area with a deflation of profits. It then goes to revenues and lastly causes price declines. We have already seen profit deflation and revenue deflation and some industries are experiencing price deflation.


We must start thinking like South American dictators (From The Guardian)
An economy on the brink of deflation needs to jettison the orthodoxies of prudence - in favour of a licence to print money
Deflation and depression are closely related. This week the UK has reported the sharpest drop in producer prices since the series began in 1975, and unemployment has reached an 11-year high with the largest jump in claimants since 1992. The Bank of England is forecasting a severe recession similar to the one that hit the Scandinavian economies after their banking collapses of the early 1990s. This, and the collapse in commodity prices, makes it likely that consumer price inflation will disappear completely before the middle of 2009. If economies weaken only a little further than now feared, then we will experience deflation. Yesterday's consumer price forecast from the Bank of England suggests this is entirely feasible - as Mervyn King, the bank's governor suggests this is entirely feasible - as Mervyn King, the bank's governor, admitted.

More about Deflation: Sense and nonsense about Deflation