Mike Shedlock Vs. Peter Schiff Vs. Robert Precher; Deflation vs inflation

[Norman]

Ok so, these 3 guys have 3 different approaches to inflation or deflation debate.

1. Mike Shedlock aka. "Mish"

Believes that there will first be a period of deflation, but after that inflation. Believes the problem is that the money is just sitting in the bank's balance sheets and no credit is being created.

[ame=http://www.youtube.com/watch?v=9DOAyuQgAW4]YouTube - Mish Shedlock, Inflation or Deflation It's Definitely Deflation, Oct 15, 2009[/ame]

2. Peter Schiff

Believes that FED can and WILL create as much inflation as is necessary to replace the credit lost. Also believes that the fed can have absolute control over the situation. In the end he believes there could even be hyperinflation if US continues deficits.

Difference between him and mish is, I think he is saying that the credit is actually going to government (bonds?). And thus will create inflation.

[ame=http://www.youtube.com/watch?v=eksf2ScG6yU]YouTube - Peter Schiff: Deflation vs. Inflation Argument on FSN[/ame]
[ame=http://www.youtube.com/watch?v=nwVxTnXumtQ&feature=player_embedded]YouTube - Dollar sell-off, CNBC, Fin Reg[/ame]

3. Robert Precher.

Believes the Credit contraction will cause deflation, and the FED, without changes in the system is powerless to really do anything about it.

[ame=http://www.youtube.com/watch?v=F-ZC6-MpjcE]YouTube - Robert Prechter was Right Deflation not Inflation is the concern[/ame]

Economic Crisis Watch: Why deflation will win: An interview with Robert Prechter




Discuss.

 

[william the wie]

To me the question is money destruction through the write off of bad debts vs. the printing press with a lot of other blackbox wildcards:

China does not publish enough data to know what is going on in there. Most of what we think we know are tear and print stories that bear a striking resemblance to Enron prior to the collapse.

The rest of the developed Far East has rapidly collapsing laborforces.

Most of Asia and North Africa has highly skewed sex ratios combined with non-reporting of HIV and hepatitis C rates.

EU debt connections to the US are for the most part indirect and underreported.

Until we find out the hard way whether this is no news is good news or what you don't know will kill you I would advise caution.

 

[Paulie]

1 is right in regards to scarce private sector debt issuance, and 2 is right about government bonds. Together they give the best outlook.

3 obviously hasn't bothered to look at even the most recent history of the business cycle.

 

[Kevin_Kennedy]

Well since inflation is defined as the increase in the supply of money, and deflation the decrease in the supply of money, Peter Schiff is the only one making sense. The Fed is not going to decrease the supply of money, therefore there won't be any deflation.

 

[loosecannon]

Well since inflation is defined as the increase in the supply of money, and deflation the decrease in the supply of money, Peter Schiff is the only one making sense. The Fed is not going to decrease the supply of money, therefore there won't be any deflation.

But the fed is powerless to force the money supply into the economy.

Like Willie said we have witnessed historic money supply destruction and the money supply was contracting dramatically until recently.

The fed can't inject money into the economy at all unless somebody borrows it. And the only borrowing happening is among financial sector investors.

Most people seem immune to the fact that money begins as debt and disappears when debt is repaid. So our economic system demands ever increasing debt in order to stay solvent.

But America and Europe are over their credit limits, the carry trade turned disastrous and there don't seem to be new methods to force money into the economy aside from government deficits.

We don't have a means to arrest deflation besides the full employment of total war.

But I would love to be wrong.

Edited to add: considering that most economists were wrong in failing to predict the credit crisis, isn't it probable that all three of these are mostly wrong as well?

 

[william the wie]

Well since inflation is defined as the increase in the supply of money, and deflation the decrease in the supply of money, Peter Schiff is the only one making sense. The Fed is not going to decrease the supply of money, therefore there won't be any deflation.

M1 will certainly increase but M3 which includes money destruction through bad debt write offs is currently the one to watch. Write offs degrade bank capital and earnings and disrupt the normal relationship between the stock of money and money supply. Increasing the money supply will eventually cause inflation but the normal 3-6 month lag to felt inflation has been lengthened. With more shocks on the way even the Reinhardt rule of 7 years depressed growth due to write offs goes right out the window the lag is already looking like years not months and so far no states have defaulted.

 

[Norman]

Well since inflation is defined as the increase in the supply of money, and deflation the decrease in the supply of money, Peter Schiff is the only one making sense. The Fed is not going to decrease the supply of money, therefore there won't be any deflation.

But the fed is powerless to force the money supply into the economy.

Like Willie said we have witnessed historic money supply destruction and the money supply was contracting dramatically until recently.

The fed can't inject money into the economy at all unless somebody borrows it. And the only borrowing happening is among financial sector investors.

Most people seem immune to the fact that money begins as debt and disappears when debt is repaid. So our economic system demands ever increasing debt in order to stay solvent.

But America and Europe are over their credit limits, the carry trade turned disastrous and there don't seem to be new methods to force money into the economy aside from government deficits.

We don't have a means to arrest deflation besides the full employment of total war.

But I would love to be wrong.

Edited to add: considering that most economists were wrong in failing to predict the credit crisis, isn't it probable that all three of these are mostly wrong as well?

At least Peter Schiff saw this and the last crisis perfectly, many years away ( the Nasdaq and housing bubble).

I think Mish also saw them.

Not 100% sure about preacher.


So yeah, these guys are not the main stream " wild idiots".

 

[loosecannon]

At least Peter Schiff saw this and the last crisis perfectly, many years away ( the Nasdaq and housing bubble).

I think Mish also saw them.

Not 100% sure about preacher.


So yeah, these guys are not the main stream " wild idiots".

well the dot com and housing bubbles were just a small part of the credit crisis. And even the credit crisis is just a small part of the shitstorm that front loaded this recession.

 

[Zander]

Prechter is correct.

We are experiencing deflation right now. It is no longer a "what if" scenario. It has become a "how long and how much further down" situation. Look at housing...prices are still falling like a stone in most parts of the country. Commercial Real Estate is even worse. In that arena Valuations are based upon INCOME. When vacancy rates climb valuations fall.

 

[Toro]

Bet on the guys with the printing presses.

 

[Truthmatters]

who came closest to reality?

who got it right?

 

[Norman]

who came closest to reality?

who got it right?

Well so far the inflationists/schiff have been right as CPI was around 3% inflation last year. Which is relatively high.

But it's way too early to call it yet. Give it 2 more years.

 

[DSGE]

Well since inflation is defined as the increase in the supply of money, and deflation the decrease in the supply of money, Peter Schiff is the only one making sense. The Fed is not going to decrease the supply of money, therefore there won't be any deflation.

They're not the definitions of inflation/deflation anybody outside the Austrian school bubble uses. When you know full well that people are referring to changes in the price level, but instead argue using your esoteric definition, that's called "equivocation" and it's a dick move.

 

[DSGE]

Bet on the guys with the printing presses.

Exactly. They've come out and said they're targeting 2% PCE inflation. So what do I expect over the next few years? 2% PCE inflation.

 

[Truthmatters]

http://www.inflationdata.com/inflation/inflation_rate/historicalinflation.aspx


Inflation doesnt seem that weighty to me

 

[expat_panama]

Well since inflation is defined as the increase in the supply of money, and deflation the decrease in the supply of money...

They're not the definitions of inflation/deflation anybody outside the Austrian school bubble uses...

Here's what most people mean when they say "inflaton" (from financial definition of Inflation (economics). Inflation (economics) finance term by the Free Online Dictionary.)--

Inflation
The rate at which the general level of prices for goods and services is rising.​

--and that means inflation has nothing to do with the money supply.

 

[DSGE]

Well since inflation is defined as the increase in the supply of money, and deflation the decrease in the supply of money...

They're not the definitions of inflation/deflation anybody outside the Austrian school bubble uses...

Here's what most people mean when they say "inflaton" (from financial definition of Inflation (economics). Inflation (economics) finance term by the Free Online Dictionary.)--

Inflation
The rate at which the general level of prices for goods and services is rising.​

--and that means inflation has nothing to do with the money supply.

Well... inflation is caused by the supply of money outpacing the demand for money, but yeah, the definition of inflation doesn't involve anything about the money supply.

 

[expat_panama]

Well since inflation is defined as the increase in the supply of money, and deflation the decrease in the supply of money...

...inflation is caused by the supply of money outpacing the demand for money, but yeah, the definition of inflation doesn't involve anything about the money supply.

There've been times we've had rising prices with a shrinking money supply and other times when the two reversed.

 

[DSGE]

Well since inflation is defined as the increase in the supply of money, and deflation the decrease in the supply of money...

...inflation is caused by the supply of money outpacing the demand for money, but yeah, the definition of inflation doesn't involve anything about the money supply.

There've been times we've had rising prices with a shrinking money supply and other times when the two reversed.

Perfectly consistent with what I said.

...inflation is caused by the supply of money outpacing the demand for money

 

[expat_panama]

...consistent with what I said...

lol --I know! I was trying to give you credit for refuting Kevin's post. As in "trying" ≠ "succeeding".