<div class='quotetop'>QUOTE (mylexicon @ Feb 23 2009, 05:53 PM)
<{POST_SNAPBACK}><div class='quotemain'>Why do you think the printing presses are running 24/7? We're going to expand the money supply by controlling the amount of paper in circulation.
If you think your government or any other government is going to allow prolonged deflation, you're fooling yourself.
Think about stockholder's equity. If you're a socialist, what better way to punish the rich than to dilute their shares without their consent?
I'm sure this will work out well for all of us.
What's up Lex? Suddenly you are putting blind faith in the very systems that have failed us and that you profess to loath. It seems you are
advocating the sort of regulation you deplore.
Why are you so sure? Government measures can only go so far before they become ineffectual - it may be out of their control. This rests in the domain of the bankers...which hardly in itself inspires confidence.
No, realistically I don't think it will be allowed to happen, but then the events of the last decade were allowed to unfold by our myopic governments - and as we all know, they shouldn't have been allowed to happen. The key indicator of price pressures shows annual inflation tumbling to the lowest rate since 1960.
Here, inflation measured by the Retail Price Index extended recent sharp falls in January, and slid to an annual rate of just 0.1 per cent, down from 0.9 per cent in December, compared with a low of minus 0.5 per cent rate registered in March 1960. The cost of living measured by the RPI dropped by 1.3 per cent in January alone, driven down by falling mortgage interest bills due to the Bank of England’s past cuts in interest rates, in addition to further marked falls in fuel prices. Yet The Bank of England is still expected to push ahead with a further cut in interest rates next month from their present, historic low of 1 per cent.
Don't be such a condescending .... Lex. I'm fully aware of the incentive to "expand the money supply" - it's termed quantitative easing. It has been well documented that the Bank is expected to introduce this quantitative easing — creating money by which to purchase assets in an effort to inject cash flow and kick-start the economy.
With RPI inflation now barely registering as positive figure, it is inevitable that it will turn negative by March. A negative figure for RPI inflation, indicating year-on-year falls in average prices across the economy and in the cost of living, and even a negative figure on the CPI gauge will see the economy plummet further into the morass, experiencing a form of deflation. Opinion is divided as to whether this will be prolonged, do you have faith in the governments and bankers that you Lex so readily deride as necessarily having the competence to avert this threat?
The three big influences on inflation are set to go sharply into reverse next year, however, with fuel prices expected to stabilise or rise again, little scope left for further cuts in interest rates and the temporary VAT cut due to expire. In turn, those effects will all put upward pressure on inflation in 2010. In spite of this, the risk of deflation could multiply as the recession approaches depression, with scant demand from a cautious consumer market forcing businesses to slash prices, and unemployment to spiral meaning pay freezes, and an overall driving down of real wages. Delay buying, triggers further price cuts from struggling businesses, and the cash flow diminishes further. The Bank Of England's decision to pursue quantitative easing tactics that you refer to Lexicon, will be designed to prevent such a scenario becoming a reality. The Bank cationed in this month’s quarterly Inflation Report that Britain will teeter on the brink of deflation for much of the next
three years.
I doubt that we are barreling headlong into an Irving Fischer type scenario of the 1930's, but the scenario that caged the Asian Tiger economies, and crippled Japan is certainly now looming in the west, and many would argue has already slain the Celtic Tiger.
As The Phorest quite correctly points out, under these circumstances, is paying big yen to run some bikes around a track high on HRC's list of priorities right now? Racing continues to be a potent shop window, but it remains expensive way to market your product during this era of ever diminishing returns. Fukui it would seem has definitely stepped aside, he won't be the last.
