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The Market Oracle |
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By: Nadeem_Walayat
UK RPI Inflation data of minus 0.4% for March represents real deflation in the official data. Whilst the Governments preferred inflation measure CPI recorded a smaller decline to 2.9% which still puts it well above the Bank of England's target rate of 2%. RPI deflation is not so surprising given the panic interest rate cuts from 5% at the beginning of October 2008 to just 0.5% by the last cut of March 2009, these cuts in interest rates coupled with quantitative easing aka "money printing" to drive down long-term interest rates and hence mortgage rates is resulting in real deflation for those with large mortgages of as much as minus 5%, therefore is providing for mini 'temporary' cash flow boom for those mortgage holders that have secure employment during the recession.
By: Paul_L_Kasriel
Is the economic recovery at hand? No, we still are mired in a recession that is going to be of the longest duration in the post-WWII era (the previous record was 16 months) and is likely to involve the largest annual average contraction in real GDP for a single year (the record to beat is a decline of 1.9%, which occurred in 1982). But there is a good chance that the worst for the U.S. economy in terms of quarterly contractions in real GDP is behind us, occurring in the fourth quarter of 2008. We currently are forecasting an annualized rate of contraction in real GDP of 3.8% in the first quarter of this year vs. the annualized rate of contraction of 6.3% in the fourth quarter of 2008. So, economic activity still is descending, but our forecast has the rate of descent moderating. We do not expect any growth in real GDP until the fourth quarter of this year.
By: Adrian_Ash
So money-supply growth of 18% plus consumer prices inflation half-as-great again as the official target now equals deflation. Right...?
OH HORRORS! "Deflation hits UK economy for first time since 1960," screams The Telegraph. "UK falls into deflation for first time in 50 years," wails The Times.
By: Mike_Shedlock
In case you are new to this story, Gregory Mankiw, professor of economics at Harvard, proposed negative interest rates in It May Be Time for the Fed to Go Negative.
At one of my recent Harvard seminars, a graduate student proposed a clever scheme to [make holding money less attractive].
By: Money_and_Markets
Tony Sagami writes: Have you become more optimistic about the stock market? If you listen to the experts on CNBC, you might think that a great bull market is right around the corner.
The most commonly cited reason to be optimistic: Some variation of “business isn’t sucking as bad as it used to.”
Read full article... Read full article...
By: Submissions
Dr. Raju M. Mathew writes: Global Economic Crisis - The world is under a great economic crisis. For the conventional economists it is only a Recession and not a Depression at all, for their partial analytical techniques, over-simplified models with unrealistic assumptions and over emphasis on data. It may take at least five years for them to realize that it would be a Great Depression and by that time it may be over. When Cybernetics is employed for the study of the working of the global economy as a whole with multi-sector approaches on the basis of the deeper understanding of Political Economy, we are forced to admit that this is not a simple Recession, but a Great Depression that requires not only economic stimulus but Ethical or Spiritual and Political Stimulus also to recover.
By: Mike_Shedlock
The New York Times is reporting Spain’s Falling Prices Fuel Deflation Fears in Europe.
Read full article... Read full article...Faced with plunging orders, merchants across this recession-wracked country are starting to do something that many of them have never done: cut retail prices.
By: John_Mauldin
There is a reason I call this column Outside the Box. I try to get material that forces us to think outside our normal comfort zones and challenges our common assumptions. And this week's letter does just that. I have made the comment more than once that is it unusual for two major bubbles to burst and for the conversation and our experience to be rising inflation and not a serious problem with deflation.
By: Prieur_du_Plessis
Asha Bangalore (Northern Trust): Retail sales - story of weak consumer spending
“Retail sales fell 1.1% in March following a 0.3% increase in February (previously estimated as a 0.1% decline). Retail sales of January were revised up slightly to a 1.9% gain from a 1.8% increase. In March, the 1.6% drop in gasoline sales accounted for some of the decline. In addition, auto sales were reported as a 0.9% drop despite the increase in unit sales to 9.8 million units from 9.2 million in February. Excluding autos and gasoline, retail sales fell 0.8% in March after a 0.7% jump in February.
By: Money_and_Markets
Mike Larson writes: It’s hard to find anyone who’s still bearish on the economy or the market these days. Listen to the average pundit on CNBC and this is what you’ll hear:
By: Mike_Shedlock
Calculated Risk has framed an interesting Inflation Debate Between Volcker vs. Kohn without weighing in on the matter. I will gladly weigh in, but first let's review the articles.
By: Peter_Schiff
In a speech this week summarizing his administration's economic policies, President Obama grossly overstated the support these policies enjoy by claiming, "economists on the left and right agree that the last thing the government should do during a recession is cut back on spending." There are a great many economists who were surprised to learn that, apparently, they now agree with the President.
By: Mike_Shedlock
The European economy is in a shambles and the European Central Bank is clearly worried. Although there is a bit of infighting among the central bank governing board, Trichet Says ECB Must Do Everything to Restore Confidence.
Read full article... Read full article...European Central Bank President Jean-Claude Trichet said the central bank would do everything possible to restore confidence and prosperity.
By: LewRockwell
Mike Rozeff writes: Economist Robert Shiller now prescribes a strong dose of medicine – actually poison – for the U.S. economy (see here). Shiller’s diagnosis and doctoring are the same as those of the Bush-Obama-Bernanke regimes. He only wants greater and more persistent doses of the poisons.
By: Mike_Shedlock
Deflation properly defined is a net decrease in the money supply and credit, with credit being marked to market. Deflation by that measure went global long ago.
By: Pravda
The number of officially registered jobless in Russia has reached 2.2 million, President Dmitry Medvedev said at a meeting with experts at the Institute of Modern Development.
By: Mike_Shedlock
Paul Krugman is back in his usual form of preaching sheer idiocy with his piece Time for bottles in coal mines.
By: Clif_Droke
Since the start of the new millennium and new century, many of the old truisms that applied to economic forecasting are no longer relevant. So many things have changed in the last nine years that a new set of economic “rules” is in order.
By: Ned_W_Schmidt
Grand and glorious global housing bubble came to an end not because it had caused so much money to be borrowed. It came to an end because no more money could be borrowed. Debt bubbles come to traumatic conclusions not because so much credit had been created. Debt bubbles implode when no more credit is available. Lack of credit, the fuel for a mania, is what comes to be the problem.
By: Money_and_Markets
The Dow has been on a mini-roll. Therefore, most investors are thrilled to see battered stock portfolios recover even a smidgen of their massive losses. The problem is that these investors aren’t paying attention to what’s happening elsewhere around the globe. And they may be missing out on the opportunity of the decade!
