Quote from: razorramon on March 09, 2015, 03:02:59 PM

Quote from: NUFCrichard on March 09, 2015, 09:55:59 AM

Quote from: ChicagoSchooler on March 08, 2015, 11:43:52 PM

I missed both of these since I pay attention to neither, but the US CPI and Europe are already deflating.

Europe continues to expand its yield flattening campaign while refusing to lower interest rates.

The US CPI has already started to deflate, and it leads the PCE, the Fed's measurement of inflation.

The PCE is already at 0.2%, probably one month from true deflation, so the US is probably already deflating.

Hearing Fed governors try to explain the rationality of raising rates while in a deflation will be very entertaining.

Oil at $50 and going down means deflation for the foreseeable future without lowered interest rates.

Has the Fed backed itself into a corner with QE since it's so overweight long term assets? Can they even lower interest rates which would cause banks to demand back those long term assets, possibly causing the Fed to require a bailout from its losses?

The US and European central banks may only have offers that they have to refuse to prevent further deflation.

I'll give this to central banks: never a dull moment.

I am no economist, so I don't understand how printing so much money, which should lead to inflation being rampant, has led to deflation, but that is where we are now.

I tend to see the current deflation as a 'good' deflation, as it comes from reductions in energy prices, meaning that people have more money in their pockets, but it won't help countries that are in debt as their debt increases with deflation, making it even less manageable than it is now (it already isn't manageble!)

I am no economist either....my guess is you print a lot of money and give it to someone who doesnt spend it

The problem is twofold. The situation when private banks receive money from a central bank ("give it to someone who doesn't spend it") but cannot lend since there are no borrowers is called "liquidity trap". Furthermore, the new money from QE goes directly to financial markets, and, as a result, we see them soaring, taking new heights and making new highs while real economy is shrinking with prices falling. And this kind of deflation cannot be good since it leads to massive unemployment, what we see in real life.

Changed the formatting for you.