Deflation Drivers

Discussion in 'Economy' started by william the wie, Jan 25, 2011.

  1. william the wie

    william the wie Gold Member

    Nov 18, 2009
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    My wife going for hip surgery Feb 10 got me looking around for cheap ways to occupy her time during the 8 weeks of recovery she will need. One of the things I have been looking at is ebooks. Both kindle and nook can be downloaded for free but what is amazing to me is the number of books that can be downloaded for free and the big discounts/earlier availability of books bought straight from the publisher. In my most recent example I bought a book, "Citadel" by John Ringo, the week it came out from Baen books for $6 and just finished downloading four books for free from the same publisher only by David Drake. I don't expect the free books for living authors to last very long but once the publisher has made back initial costs and the market stabilizes royalty times 111% is what I would expect as the longrun price number or $2-3 after it has been on the market for a year. That would mean a 90% decline in GDP contribution for book publication.

    I have also been looking at FL tax liens that pay 18% p. a. The minimum bid at tax sale is, as I understand it, three years of taxes plus three years of interest for the two lien payments or roughly 7.08% of appraised value for Jax Beach where I live. Given the size of the shadow inventory, 5-9 years, and the lack of bank cashflow needed to maintain and pay taxes on foreclosed homes means that 7-10% of the peak price is the probable bottom in FL. That would mean $24.5K for houses that sold for 350,000 in 2006. While the formula is different in other states similar mechanisms are at work in all 50 states. This is another engine of deflation.

    Already mentioned in another thread is the increased research in bio-tech production of fuel. Right now the claim is that existing bio-tech fuel is at about $80/bbl for slaughterhouse wastes and methane extraction from landfills. $30/bbl is the claimed projected returns for algae production next year which probably translates to $60-75/bbl realized within a year. Assuming that this is a trendline then a cap of $17-18/bbl for oil in constant dollars should be seen within a decade or just shy of 90% deflation.

    Netflix for videos and ipad for audio downloads have already lowered the costs of most software.

    With deleveraging taking hold I believe that the Rep/Dem plans to reflate the economy will fail catastrophically.

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