Ireland gets deflation

For the time being, I am more worried abut the potential inflationary effects of quantitative easing than about the deflationary impact of deleveraging.  But, the latest news from Ireland shows us that deflation is alive and well. This comes via the Irish Independent: Consumer prices recorded a second annual drop in April as the cost

Britain gets deflation

An increasing number of countries are recording negative year-on-year inflation numbers. I reported first on Spain, then on Switzerland.  Add the U.K. to the list as well. Deflation returned to Britain for the first time in nearly five decades last month as prices measured by the retail price index (RPI) were lower than the same

Liquidity

This is a re-post that I hope serves as a reminder that although we are NOT talking about a liquidity crisis in the financial sector, but rather a solvency crisis, liquidity remains very much a concern. This post, despite being 6 months old, should highlight this issue in terms that are equally true today. The

Switzerland gets deflation too

First Spain, now Switzerland: Consumer prices in March were down 0.4% from a year ago, the Federal Statistics Office said, a 50-year low. The country has been close to deflation all year, with inflation having fallen from a peak of 3.1% in July 2008. The rate was 0.2% in February. The Swiss National Bank predicts

Spain gets deflation

Spain is one of the original four bubble economies to implode.  This group includes the U.S., the U.K. and Ireland.  Unfortunately for the Spanish, in the wake of their property crash, things in Spain are looking particularly bleak with unemployment rising, GDP plummeting, and banks like Caja Castilla-La Mancha and property developers like Martinsa Fadesa and Drac

Fix the real economy first: lessons from James Montier

James Montier has a very good piece out via John Mauldin ([email protected]) on the need for real economy stimulus over financial sector stimulus. The quote I find most memorable goes to the heart of our debate about the financial system: Investors seem to be rather excited about banks posting profits at the moment. Frankly, if

Will China enter deflation?

According to this Bloomberg video, China will enter deflation when data is released later today. Deflation may stay with China for all of 2009 because of lower commodity prices

A conversation with Bridgewater Associates’ Ray Dalio

Update: 18 Mar 2008. I am reposting this entry from Feb 10th because it is relevant to the need to liquidate insolvent institutions like AIG that are now getting bailouts

Goldman says fund managers expect deflation

Goldman Sachs London conducted a poll of fund managers today that had interesting results. The poll demonstrated that fund managers are expecting deflation more than inflation and that they expect the U.S. or Asia to escape the downturn first (and certainly not Europe or the UK). I imagine that funds are positioned accordingly.

Here are the poll results

U.S. CPI: Lowest since 1954 – deflation here we come

The United States Department of Labor released its monthly data on inflation today at 8:30AM. The data showed that inflation rose only 0.1% over the last year, the lowest reading since 1954. I should note that oil and food prices continue to fall. Combine this with slow consumer demand which will feed through into consumer prices and you have deflation by next month.

While we should welcome lower prices, we should be aware that they are due entirely to falling demand and excess supply; that is a world of difference to deflation from productivity gains. This is the environment of depressions. The economy is looking more and more like the 1930s every day

My best and worst calls of 2008: a credit crisis retrospective

This is the time of year when everyone tends to look back and sum up the year in one way or another. I have been doing much of the same.

In keeping with that theme, I have taken a good look through my nearly 1400 posts to get a better sense of what I got right and what I got wrong and how knowing that can help me going forward. Call it an exercise in intellectual honesty. This exercise has given me a good understanding of where things went wrong in the past year and why.

It may also give me some thoughts as to where we need to go in 2009. Let me share a little of what I learned with you. This is a long but thoughtful post, so take a few minutes. It should be worth it.

On the whole my predictive powers were working pretty well this year. But, I made a few lousy calls and some controversial ones along the way. Below is my view of how the year went, on some of those calls and links to the relevant posts. At the end, I’ll wrap it up with a few thoughts about where that leaves my thinking for

Inflation explained

This video from the 1930s is a timeless piece of work, giving an explanation of what inflation and deflation are and how they work. (hat tip Tim Iacono)