Randy_H's Q&A

chaz, chaz, chazI normally don't usually blog over weekends.  Check the history of my posts if you don't believe.  I prefer to spend that time with my family.I'm sorry that I apparently struck a nerve so much that you feel the need to lash out.  I guess when you can't hold an argument the only resort is to make insults.Just keep in mind, you're a anonymous coward who has already enjoyed more of my (and others) attention than you ever merited.  If you wish to debate further, step up and come out from hiding in the shadows.  Otherwise, everything you say is just so much prattle.  Yea yea yea, I was born on planet Krypton and was a troubled youth also...

ChazThis episode is unique in a number of ways, but not so much that we're helpless.  I'm a strong believer in general non-predictability myself, but more in line with Taleb (I suggest you read Fooled by Randomness, if nothing else, though The Black Swan is great reading for everyone too).There were factors in the 1930s that were very different from today which presented differently complicated problems.  For example we&most of the world had just recently erected the basis of modern labor laws and worker protections, causing one of the legs of the economy to suddenly take on an entirely different role in the ability of the government to fix things.  There was also plenty of leverage in the 1930s, just not modern derivatives.  But there were rough equivalents which were appropriately large given the sizes of the economies back then.The problem is more of a tipping point one.  Once things push over that threshold, it's really a roll of the dice how they land.Also, before you despair for future generations, I suggest taking a look at Strauss & Howe's old book, The Fourth Turning.  I'm not a huge cyclical theory sort, but there is something in there to give you hope vis-a-vis generational/cultural stuff.

nvchazYour description is a good one for monetarist theory which calls for monetary expansion in excess of real growth to result in inflation.  There's a problem, however.  If that theory is true, then stagflation cannot exist (and thereby didn't ever happen).  But, as we know, it did.  Not just some temporary deal either, but years of sustained stagflation.See, if you increase the money supply and create inflation, then everything must inflate, including wages and eventually GDP.  Maybe a quarter or two of lag, but not years.  Perhaps you and the other inflationists will be right, and the 2nd half of this year will be nothing but up up up.  That means salaries too.  Up up up.  And probably houses.  Up up up.I rather doubt it.  The amount of money being destroyed is so much bigger than anyone is grasping.  Think of a gigantic upside-down pyramid called "the leverage pyramid".  At the top is some two-thousand-trillion in derivative value.  Layers down are different forms of levered assets.  At the bottom is commodities.  Barely even 1 trillion at that level.Well, most of the top is being wiped off the face of the earth.  Now, how much money do you have to print to inflate in excess of all those thousands of trillions lost?  (So far the entire worlds' central banks have printed up maybe 10-15-trillion, by the way).

What exactly is your point anyway?..."deflation is the arch enemy of inflation?" WTF is that supposed to mean? What about "stagflation"; what about "hyper-inflation".--qedConsider yourself elucidated. 

Stagflation: inflation with no corresponding growth in GDP.Close, but no cigar.  There's a component of labor essential to that as well.  Namely, a breakdown in the relationship between incomes and growth.Now, how can you so cocksurely declare that printing-money automatically equals inflation?  For that theory to work (monetarist theory of money), then stagflation should be impossible.

Um... let's see now... that would be the early United States would it not?Before we had a credible military (at the time as in a navy) there was a period of hyperinflation.  Well, not actually, given hyperinflation means an order of magnitude per year, or 1% _per day_ by most definitions.

And at that, please explain "stagflation" to me.  What is it and why is it anything special?Hint:  don't try using Wiki, you'll go astray.  Hint hint:  if "stagflation" is a real phenomenon, then your theory of why printing-money creates inflation is invalid because the macro theory describing the latter states that the former is impossible.

Give me an example of any modern (or most antiquity) nation state that has ever suffered sustained hyperinflation so long as it maintained a credible military force.I joyously await your answer.

So we agree on something.  Indeed the current efforts by the Fed will have little more than a fleeting effect on "jump starting" the housing market.  I love how TV pundits keep saying "give the housing market the jump start it needs".  No.  It doesn't need any jump start.  It needs to correct.  Prices _need_ to come down to 3x people's incomes.I was using $50K because that is above the median in my old Ohio hometown, where home prices didn't bubble much to the naked eye, and most people would have a knee-jerk reaction that prices there are easily cheap, and one should buy instead of renting there.  But the problem is prices there imply 4-5x the residents' incomes, which is not affordable.  Those are not good deals.  And those people should continue to rent, _even if renting costs more than buying_.  Rent-v-buy is only part of the equation ... and the easy part at that.  The hard part is affordability.As for the long-bond.  I'll let you in on a secret.  I'm no inflationist, and I strongly believe there is broad-based deflation right now.  I take a lot of crap for that position, in fact, among the previously-bubble-blogger community.  But I shorted the 30 year (futures) when it went below 2.5% yield, and made quite a bit of $.  I'll beg borrow and steal to short if it ever goes below 2%.  I don't care if I'm drawn down by a quarter million for 10 years, that is a trade that is guaranteed to pay off greater than all the dreams of all the flippers combined.

Deflation is real.  You have to cut through the wall of ignorance, disinformation, and self-serving prophecy.  If you read most of the "in-the-know" blogs/sites, you run into about 19-of-20 self-righteous inflationists touting something or another about gold, crude, and evil central banks.  The truth is, they fear deflation to the bone because it robs them of the spoils they've been promised by their messiah, Peter Schiff.Then there's the government, who has managed to distort official figures so badly that you can't tell what the hades is going on most of the time from the numbers.  Hedonics for the sake of hedonics.  If you de-hedonize the numbers by just 10 years it reveals that deflation is running about -6% right now.  That's real farking bad.  Devestating.Finally there is ignorance.  That can be excused inflation (and thereby deflation) is very poorly understood by most people.  Even people who understand monetary inflation often miss natural growth-inflation's effect on prices.But in theory, if you added three 0's to the end of everyone's bank dollar bills, nothing would change except price tags would be longer.  In practice what would happen is a wide swath of the public would get screwed because of the way inflation-expectations lag real-inflation, which lets people exploit the situation and make money off of inefficiency.