US Economic Recovery

[Dazey]

You can't be serious, downzy. Love you, but that's just economically ignorant.

Explain... I don't know why low oil prices, t-bills and bond yields are considered terrible?

I thought high t bills were partially responsible for the end of British rule.

[magisme]

T-Bills & Bonds:

Yields on government bonds in the U.S., Germany and Japan plunged Tuesday as anxiety over global growth intensified and investors sought havens from widening financial-market turmoil.

Economists and investors are increasingly concerned that the stagnant economies of the eurozone may be headed for a prolonged bout of deflation—a damaging spiral of falling prices and reduced spending and investment. That, in turn, has sparked worries about the resilience of the U.S. economy, which thus far has managed to accelerate in the face of economic stumbles in other major markets. But as oil prices fall and stock markets decline, some investors are losing confidence.

http://www.wsj.com/articles/u-s-government-bonds-continue-to-strengthen-1420552119

Oil is about supply and demand. Supply has continued to grow while demand has stagnated because of the shit state of the global economy.

....

And so all of that and pretty much every other metric that measures the global economy shows that times are bad yet fucking stocks are through the roof? Yeah, that's not normal. Or, I should say, that's been the new normal since the dot com bubble. First the dot com bubble burst. Bubble back up with housing. Then that burst. Now the Fed has forced people into risk assets by eating up so many treasuries, creating a bubble that by all measures is about as severe as dot com and housing combined. It might go up for a while longer, but it's going to come down fucking hard, and everyone will be screaming about how no one saw it coming.

Edited January 7, 2015 by magisme

[Facekicker]

You can't be serious, downzy. Love you, but that's just economically ignorant.

Explain... I don't know why low oil prices, t-bills and bond yields are considered terrible?

Collapsing oil prices are going to bankrupt the shale industry for a start....and that's just the U.S.

[Dazey]

On the positive side the shit state of the Euro is great news for us Brits right now. The pound/euro exchange rate is fucking brilliant.

[magisme]

You can't be serious, downzy. Love you, but that's just economically ignorant.

Explain... I don't know why low oil prices, t-bills and bond yields are considered terrible?

Collapsing oil prices are going to bankrupt the shale industry for a start....and that's just the U.S.

Yup, there's that too. US job gains have been dominated by shit service industry part time jobs and quality shale region jobs. Now the shale companies can't afford to do shit, so you can forget about those jobs sticking around.

[downzy]

You can't be serious, downzy. Love you, but that's just economically ignorant.

Explain... I don't know why low oil prices, t-bills and bond yields are considered terrible?

Collapsing oil prices are going to bankrupt the shale industry for a start....and that's just the U.S.

But that's on the assumption that low oil prices are going to stick around on a long-term basis. Corporations do not necessarily operate on such short-term fluctuations. Things will get deferred until supply decreases or the technology to procure shale oil drops. Most shale oil becomes economically viable around $50 - $60 a barrel. Plus, new production technologies are knocking that price perpetually downward. VKG Oil has developed technology that produces economically viable oil at $13 a barrel (assuming a site is running at full production).

It may slow down productions, but it's not going to do what you and the Saudis are hoping for. Moreover, as Saudi oil production increasingly moves further offshore, it's not as if they can continue spite more expensive procurement methods either.

[downzy]

T-Bills & Bonds:

Yields on government bonds in the U.S., Germany and Japan plunged Tuesday as anxiety over global growth intensified and investors sought havens from widening financial-market turmoil.

Economists and investors are increasingly concerned that the stagnant economies of the eurozone may be headed for a prolonged bout of deflation—a damaging spiral of falling prices and reduced spending and investment. That, in turn, has sparked worries about the resilience of the U.S. economy, which thus far has managed to accelerate in the face of economic stumbles in other major markets. But as oil prices fall and stock markets decline, some investors are losing confidence.

http://www.wsj.com/articles/u-s-government-bonds-continue-to-strengthen-1420552119

Oil is about supply and demand. Supply has continued to grow while demand has stagnated because of the shit state of the global economy.

....

And so all of that and pretty much every other metric that measures the global economy shows that times are bad yet fucking stocks are through the roof? Yeah, that's not normal. Or, I should say, that's been the new normal since the dot com bubble. First the dot com bubble burst. Bubble back up with housing. Then that burst. Now the Fed has forced people into risk assets by eating up so many treasuries, creating a bubble that by all measures is about as severe as dot com and housing combined. It might go up for a while longer, but it's going to come down fucking hard, and everyone will be screaming about how no one saw it coming.

No, oil demand hasn't stagnated, it just isn't rising as fast as supply. Lowering oil prices should provide a jolt to struggling non-commodity-based economies (in Canada, it's not great for Alberta, but fantastic for provinces like British Columbia and Ontario).

I wouldn't say times are bad (relatively), but that we still have some ways to go with respect to overall demand. The stock market isn't a measure of an economy but a gauge on corporate economic health. And by that measure, things are pretty good. And your graph speaks to global conditions but the S&P is largely a U.S. metric, where things are considerably better than other regions.

"The Fed has forced people into risk assets" ??? Really, how so? If anything, they've removed much of the toxic/risk assets off the balance sheets of corporate Americans by buying up toxic mortgage assets back in 2008. But they still own those assets, which are starting to come around as housing prices show signs of life and rebound. If anything, the Fed did the best it could to take as much air out of the bubble so it didn't pop bigger than it already did in 2008/2009.

Always the alarmist Mags. This "sky is falling/hyper-inflation is coming" proclamations are starting to sound a tad absurd six years on.

[magisme]

No, oil demand has stagnated. I'll find you the charts later.

And there's already news today of a shale company going bankrupt today. So there you go with that. It'll be the first of many.

And you're wrong about the Fed too. I'll go into that when I have a chance. And six years on? I've been here since 2012.

Terrible post, man.

"The Fed has forced people into risk assets" ???

Very quickly. This isn't even debatable. Everyone admits this. Use your Google.

[downzy]

No, oil demand has stagnated. I'll find you the charts later.

And there's already news today of a shale company going bankrupt today. So there you go with that. It'll be the first of many.

And you're wrong about the Fed too. I'll go into that when I have a chance. And six years on? I've been here since 2012.

Terrible post, man.

"The Fed has forced people into risk assets" ???

Very quickly. This isn't even debatable. Everyone admits this. Use your Google.

"Global demand will increase by 900,000 barrels a day to average 93.3 million barrels a day, according to the report."

link: http://www.bloomberg.com/news/2014-12-12/iea-cuts-global-oil-demand-forecast-for-4th-time-in-five-months.html

Oil demand is slowing, but only relative to previous consumption increases. But it's still going up. Stagnating suggests that oil consumption stays the same, which is not what forecasts are suggesting.

Really, you think one shale oil company filing for bankruptcy proves your point? Come on, you know better than that.

You're repeating the same garbage arguments that have been perpetuating for six to seven years on now. How many more years of low-inflation does it take for hyperinflationists to admit that they were wrong?

If you're arguing that low interest rates have helped fuel money into certain asset-classes, then yeah, i'll agree to that. But high-risk assets? If anything, the Fed has been forcing banks to keep more high-quality assets on their books in the event of another downturn. The notion that the Fed has created some sort of asset bubble isn't something I'd subscribe to. The only articles that seem to gel with what you're saying can be found on sites that have been ringing the alarm bells of hyperinflation for years.

[magisme]

A whole six years?

And I'm not talking about hyperinflation yet. I'm actually talking about the deflation that comes first.

How long did it take to blow the housing bubble and then burst it? Oh yeah, seven years.

[downzy]

A whole six years?

And I'm not talking about hyperinflation yet. I'm actually talking about the deflation that comes first.

How long did it take to blow the housing bubble and then burst it? Oh yeah, seven years.

Oh, that's right, you're the "deflation causes inflation" guy....

Enough said

[magisme]

A whole six years?

And I'm not talking about hyperinflation yet. I'm actually talking about the deflation that comes first.

How long did it take to blow the housing bubble and then burst it? Oh yeah, seven years.

Oh, that's right, you're the "deflation causes inflation" guy....

Enough said

That's how it works, though. Prices go down, TPTB freak the fuck out and devalue the currency to support prices, and then TPTB find out they're not as smart as they thought they were.

I honestly don't know what's going to happen with inflation in the long run. My guess is it will be bad because that's what's happened pretty much always, but that depends on the actions of leaders, which can't necessarily be predicted.

[downzy]

A whole six years?

And I'm not talking about hyperinflation yet. I'm actually talking about the deflation that comes first.

How long did it take to blow the housing bubble and then burst it? Oh yeah, seven years.

Oh, that's right, you're the "deflation causes inflation" guy....

Enough said

That's how it works, though. Prices go down, TPTB freak the fuck out and devalue the currency to support prices, and then TPTB find out they're not as smart as they thought they were.

I honestly don't know what's going to happen with inflation in the long run. My guess is it will be bad because that's what's happened pretty much always, but that depends on the actions of leaders, which can't necessarily be predicted.

Japan.

[magisme]

A whole six years?

And I'm not talking about hyperinflation yet. I'm actually talking about the deflation that comes first.

How long did it take to blow the housing bubble and then burst it? Oh yeah, seven years.

Oh, that's right, you're the "deflation causes inflation" guy....

Enough said

That's how it works, though. Prices go down, TPTB freak the fuck out and devalue the currency to support prices, and then TPTB find out they're not as smart as they thought they were.

I honestly don't know what's going to happen with inflation in the long run. My guess is it will be bad because that's what's happened pretty much always, but that depends on the actions of leaders, which can't necessarily be predicted.

Japan.

Yes. They are ruining their country trying to escape a deflationary spiral. It's not going to end well for them. Hell, it's pretty terrible for them right now.

[downzy]

But it belies your argument that deflation leads to inflation. In fact, I can't think of a single example where deflation caused policy makers to overshoot that led to significant amounts of inflation. There were no incidents of deflation in the mid to late 1960s prior to the inflationary periods of the 1970s and early 1980s. Hell, if you look at the poster child of inflation/hyperinflation, the Weimar Republic, you still won't find instances of deflation.

[magisme]

100% incorrect about Weimar. And there are many other examples. Again, your historical timeline is far too short. We're talking civilizational shifting shit here, not, "Oh gee, the Republicans are really gonna get it in the mid-terms."

[bran]

You can't be serious, downzy. Love you, but that's just economically ignorant.

Explain... I don't know why low oil prices, t-bills and bond yields are considered terrible?

Collapsing oil prices are going to bankrupt the shale industry for a start....and that's just the U.S.

a steel company in cleveland ohio just laid off 750 workers due to falling oil prices.

http://www.post-gazette.com/business/pittsburgh-company-news/2015/01/06/Falling-oil-prices-to-blame-for-more-than-700-U-S-Steel-layoffs/stories/201501060158

[magisme]

[downzy]

100% incorrect about Weimar. And there are many other examples. Again, your historical timeline is far too short. We're talking civilizational shifting shit here, not, "Oh gee, the Republicans are really gonna get it in the mid-terms."

No, it's not incorrect at all. Deflation only occurred relative to the massive amounts of inflation that preceded it, and it was only temporary. Look at the table you provided above. There was rampant inflation starting in 1919 and lasting 13 months. The prices came back down before ratcheting back up. And prices had relatively stabilized for most of 1922.

Moreover, to suggest that the hyperinflation was the result of policy measures to combat deflationary pressures is revisionism at an absurd level. Hyperinflation was brought on by the reparation payments from WW1. Or, better said, inflation was brought on when the Weimar Republic defaulted on those payments. Your limited table simply highlights a little blip in an overall trend that was brought on not by policy makers combating deflation, but by the ramifications of the peace treaty signed in Versailles. Hyperinflation really got going in 1923, the year where the Weimar Republic faulted on its payments to France and England.

Once again your assertions and examples are without context. They're showing weak examples of correlation without demonstrating causation.

Really, you're going to use Zimbabwe, a failed state if there ever was one run by a despot, as part of your argument that deflation causes inflation? I feel like I shouldn't even bother refuting this point but what the hell, why not.

First, your graph on Zimbabwe inflation doesn't even measure inflation; it measures currency values relative to the U.S. dollar. Actual inflation rates for Zimbabwe show it averaging around 20 - 40 percent from 1992 to 1999, when it rose to 55 percent before really taking off. The range of supposed "deflation" that your graph points to (2001 - 2003) saw actual inflation (as measured by CIP) rise from 55 percent to almost 600 percent. And that was just the beginning. By 2008 the official rate of inflation for the country of Zimbabwe was a number that I'm not sure even has a name (89,700,000,000,000,000,000,000 %).

Moreover, let's not pretend it had nothing to do with the white land seizures instituted by Mugabe that destroyed personal wealth within the country. Or the printing press running on overdrive to funnel funds into the Congo civil war. Again, no respectable commentator on foreign policy or economics would ever argue that the brief stabilization of Zimbabwe currency (and not CPI) that occurred in the early 2000s caused deflationary concerns for Zimbabwe policy makers. It just did not happen.

As for Argentina, deflation (or the concerns of deflation) absolutely did not result in policy makers "overdoing it," thereby bringing on inflation. At the very end of 2001 (exactly where the CPI starts to rise in your chart), the Argentinian government defaulted on its debt obligations, roughly $132 billion. This, coupled with abandoning peso - U.S. dollar parity, plunged the value of the Argentinian peso, which explains why prices shot through the roof from 2002 to mid 2003. Again, it was not a concern for deflation that drove prices, it was the Argentinian government's inability to pay the $132 billion it owed due to the fixed-exchange rate. By allowing the peso to float, it lost a significant amount of its value, thereby jolting prices.

Again, context matters. Posting a graph or table and arguing that they prove causation, and hence support your argument, makes little sense. You're also being selective about your data points. Why didn't Argentinian inflation spike in 2000 when, according to the chart you provided, the CPI also fell below zero? We've seen many instances of deflation all over the world the past five years with almost no incidents of inflation resulting.

You can tell me my posts are terrible and that I'm wrong all you want. But I recommend that in the future you might want to provide context to your arguments rather than just isolated charts that neither measure what you think they do or speak to the issue at large.

[magisme]

Look, downzy, everything I'm saying is widely accepted. The sky is blue. I can't go on with this. It's like debating in bizarro world.

[magisme]

HOUSTON — With oil prices plunging at an ever-quickening rate, producers are beginning to slash the number of drilling rigs around the country.

The national rig count had remained surprisingly resilient over recent months even as oil prices dropped by more than 50 percent since June, and it still tops the count of a year ago as domestic production continues to surge.

But an announcement on Wednesday by Helmerich & Payne, the giant contract rig company, that it planned to idle up to 50 rigs over the next month sent shudders through the industry. And that came on top of 11 rigs that it has already mothballed, meaning that in just a few weeks, its shale drilling activity will be reduced by about 20 percent.

“Low oil prices are increasingly impacting the U.S. land drilling market,” the company said in a presentation to a Goldman Sachs energy conference.

The announcement was an early indication that the oil industry, with its history of booms and busts, was in the early stages of its latest downturn. Energy companies drop rigs when drilling costs outpace the price they think they will attract, leading to lower production and higher prices. But until the effects ripple through the market, consumers and the broader economy will most likely enjoy the benefits of low gasoline and heating oil prices for at least the next six months, energy experts say.

http://www.nytimes.com/2015/01/08/business/us-oil-producers-cut-rigs-as-price-declines.html?hp&action=click&pgtype=Homepage&module=first-column-region&region=top-news&WT.nav=top-news

[downzy]

Look, downzy, everything I'm saying is widely accepted. The sky is blue. I can't go on with this. It's like debating in bizarro world.

If it's widely accepted, why can't you provide one example of what you're stating that holds up to scrutiny?

Find me one person with a phd in economics that supports your argument. Just one. Give me one example where deflation is the direct cause of inflation (or, as you've argued, caused federal banks to overreach in combating deflation and produced too much inflation) that can't be explained by far likelier causes.

You're just providing graphs and tables without any context or rationale as to why it supports your argument. Nor do you bother to counter any of the positions that I've put forward. You'd rather just assert your supremacy on this issue and disparage arguments and evidence that differ than your position without actually speaking to a single one of them.

[Facekicker]

Gibe it a few months

[magisme]

Sorry, downzy, but you don't even understand your own posts. You are clearly not versed in economics, so I'm just not gonna do this. I can't debate you because you confuse almost all the economic terms you use and contradict yourself in virtually every sentence.

[downzy]

Sorry, downzy, but you don't even understand your own posts. You are clearly not versed in economics, so I'm just not gonna do this. I can't debate you because you confuse almost all the economic terms you use and contradict yourself in virtually every sentence.

Care to give me one example of where I'm confused. Granted, I didn't major in economics, but it was something I studied in university. Don't recall getting any failed grades in the subject, but maybe you know something my economics professors did not.