Comments on: Oil Pulse (II)

By: NRx_N00B

NRx_N00B — Tue, 03 Feb 2015 23:09:43 +0000

Dead cat bounce or what?!

By: Hurlock

Hurlock — Sun, 01 Feb 2015 12:46:52 +0000

It’s the initial inflation and boom which is the real collapse, the readjustment via deflation is how the economy fixes itself.

By: Matt

Matt — Sun, 01 Feb 2015 06:03:07 +0000

Capital investment like any other spending declines in a deflationary death spiral.

Central bankers can’t really resolve cascading deflation. They can only prop up asset prices which makes the wealthy happy as their portfolios rise while the rest of the economy deflates and contracts.

Deflationary death spirals require demand management. Fiscal policy. Monetary policy is ineffectual.

By: Aeroguy

Aeroguy — Sun, 01 Feb 2015 05:16:32 +0000

There is a difference between a death spiral and and the cleansing fire of economic adjustment. The idea the central bankers can deliver us unto goldilocks is a sham. They have done nothing of the sort and history proves it. Did you even read the part jay posted? If deflation is about people not buying crap they don’t need, they don’t bury the money, it goes into capital investment. Money and the associated production doesn’t disappear, it gets redirected. Sure it can collapse the plastic crap market, good riddance.

By: Matt

Matt — Sun, 01 Feb 2015 05:02:36 +0000

Wanting to collapse the economy for some fetish for “readjustment” or to scoop up some cheap stuff at collapsing prices is high time preference.

If you want investment in the future, you need a functioning stable economy, not an economy collapsing into a deflationary death spiral.

By: Hurlock

Hurlock — Sun, 01 Feb 2015 02:02:04 +0000

@Matt

“The notion that we have to go through a deflationary death spiral “eventually” is of course nonsense. “Eventually”, we’re all dead. So why not everybody undergo “readjustment” and off themselves now?”

This is why we can’t have nice things.
(Like a lower time preference)

I keep forgetting that trying to talk some sense into imbeciles like your is an utterly futile endeavour. There is no cure to the ‘in the long-term we are all dead’ type of thinking.

By: Matt

Matt — Sun, 01 Feb 2015 01:42:06 +0000

My point regarding deflation is correct, with or without money printing.

The notion that we have to go through a deflationary death spiral “eventually” is of course nonsense. “Eventually”, we’re all dead. So why not everybody undergo “readjustment” and off themselves now?

By: admin

admin — Sun, 01 Feb 2015 01:02:15 +0000

Thanks — very interesting, I’ll follow that up. Can’t understand why I’ve never seen it thrown at the Peakers.

The link you provide doesn’t seem very convinced by the empirical reliability of Hotelling’s Rule: “[Which] is not in line with the statistics observed over more than a century. Statistics concerning U.S. price data for the period 1870–2004 for copper, lead, zinc, coal, and petroleum, 1880–2004 for tin, 1900–2004 for aluminium and nickel and 1920-2004 for natural gas, reveal the rate of change of prices of these resources being influenced by a high degree of volatility. But the more important phenomenon is that the volatility seemed to be centered at 0. In fact the mean rate of change of price in none of the ten cases is considerably different from 0. Thus the actual price of the resources does not seem to be following a particular trend and definitely not the path of the positive trend as recommended by Hotelling’s rule.”

By: Hurlock

Hurlock — Sat, 31 Jan 2015 21:49:16 +0000

The issue is that the current deflation is a natural effect of previous inflation by monetary expansion.
Which is why your whole point is totally wrong, especially when applied to the economy nowadays.The deflation is a naturall readjustment process after the boom and inflation caused by printing money. If the central bank stops printing money, deflation ensues. If it continues printing money it doesn’t. The issue is that the more money you print and feed into the economy the more you need to print to keep it afloat. This initiates a positive feedback loop which eventually leads to hyperinflation and afterwards an even a worse case of deflation.

Eventually you will have to go through the deflationary readjustment. The question is do you want it to happen sooner or later. Optimally you want it to happen sooner rather than later, because the sooner you go through it, the less painful the readjustment will be. But in a democracy, nobody wants to be ‘that government’ which ‘allowed a depression to happen’. So everyone kicks the can down the road.

By: Hurlock

Hurlock — Sat, 31 Jan 2015 21:23:12 +0000

Don’t try to explain to Kgaard that he is full of shit, it doesn’t work.