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Real Deflation began with the 1925 Recession and collapse of the housing market.
No doubt, you're totally oblivious to the fact that you suffered from Real Inflation running about 15%-25% annually right up through the end of World War I....and that in fact, is what caused Real Deflation and the 1925 Recession and collapse of the housing market.
You will not see Real Deflation in the US, until you first see Real Inflation. The last period of Real Deflation came in the 1980s and 1990s right after a bout with Real Inflation. The Real Deflation was very mild and there's no real explanation as to why, although some evidence points to oil prices, Japan and Korea.
Seems to me would have had deflation. That would have hurt bankers massively and those collecting entitlement checks, but helped the middle class.
Deflation would have happened in leveraged asset classes, but that should have happened as a necessary evil.
Markets go through natural cycles and when they get overheated, then a correction is painful but necessary.
The thing that no one seems to understand, is that Fed intervention has only postponed an eventual correction in leveraged markets.
The markets today are at the levels they are because of the flow of money coming from the Fed.
There is no natural growth in the markets and when the Fed eventually can no longer keep the markets growing from their printing, the markets will collapse, and that collapse will be worse than what would have happened had they not intervened in 2008.
We are currently 58 months into this stock up cycle, and the longest bull cycle in history was 60 months.
But then again we have never had a market supported by the Fed before so who knows how long they can keep this up. All I know is when it does remove it's support the markets will correct.
People who think markets only go in one direction are in for a painful lesson.
Not perhaps on the planets you are most familiar with, but here where most of us live, deflation was a massive and looming PROBABILITY that was only narrowly averted. A hit instead of a near-miss on a deflationary global financial collapse would have left economic and political devastation on scales that few can actually imagine. Given the vastly increased degrees of interdependence, it is necessary to think well beyond the scales of the Great Depression. The idea that things would have gotten better faster if only they'd been allowed to get so much worse first is pure and absolute fairy tale hogwash. Theories of "real inflation" versus "real deflation" are examples of a mindless gooberism typically produced by those with an irrational attraction to bright, shiny objects and a slavish devotion to the self-serving heterodox ramblings of a bunch of internet hucksters and whackjobs. The world is sadly full of those with ample time to collect minutiae yet not the first grain of the sense that is necessary to reduce and synthesize it all into competent, rational analysis and interpretation. The internet puts all sorts of information at people's fingertips. Unfortunately, the bulk of it is absolute rubbish.
Deflation would have happened in leveraged asset classes, but that should have happened as a necessary evil.
Deflation would have happened in YOUR WALLET. And everyone else's. We would all have been screwed, as defenseless as shoppers in downtown Hiroshima on the morning of August 6, 1945.
Quote:
Originally Posted by jimhcom
Markets go through natural cycles and when they get overheated, then a correction is painful but necessary.
There is no such thing as natural cycles. The natural state of an economy is a slow, steady expansion driven by population and productivity gains. When things get off that path, it is because something has gone or been done wrong. Individual markets are merely more vulnerable micro subsets operating under the same general guidelines. There are no mystical forces. There is no invisible hand.
There would have been risk takers with deep-pocket who would have bought up most of the zombie companies.........assuming both assets and obligations.
Handsome princes and white knights. No such people existed. No such thing would have happened. It's all worthless head-in-the-clouds, pie-in-the-sky nonsense.
Handsome princes and white knights. No such people existed. No such thing would have happened. It's all worthless head-in-the-clouds, pie-in-the-sky nonsense.
Fine, then the assets would have been sold-off to the highest bidder.
Without the Fed's stimulus and QE, we'd now be minus a bunch of evil big banks, the recession would be over, and we would be well on the way to recovery. Unfortunately, that's not the case, and we're on the verge of bankruptcy.
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