>Wow, your calling me an optimus :)
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>The amount of demand erosion has surprised me a bit, and also how quickly Europe and China declined as well. Its hard in such a stressed and manipulated economy to be able to predict much of anything.
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>I would be interested in hearing your POV about Deflation, Inflation senerios going forward if you care to start a thread.
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>Bob
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I feel embarassed to start new off-topic thread so I will try to say something here. Please, remember that I play pessimistic side in this exchange :).
One may recognize serious deflationary trend in the current economic environment. Practically all commodity prices, not just oil, already declined by 30-50%, and it continues, i.e. it does not go well with all consideration about printing press, cheap money, failing dollar etc; i.e. inflation is suppressed so deep that future scenarios of hyper-inflation look questionable. It is safe to assume that commodity prices will get translated to retail prices in due time.
It is a common knowledge that inflationary/deflationary pressure depends on ratio between money supply and the amount of goods and services produced. However, the latter part of the sentence is not as simple as it's usually presented. Goods and services are not only bread and cars. It also includes all kind of paper contracts, debt obligations, insurance policies, i.e. everything called "securities". This securitized volume always had few interesting features. Firstly, people used to create too many securitized entities (aka Ponzi schemes) and then these entities exploded at their faces disappearing in flames. Secondly, it was a hidden process, i.e. people did not know exactly how many "securities" they produced until it suddenly came up to the point of bursting down.
In other words, real money supply was always supposed to match those "security volumes" but this process did not go smoothly. At some point system experienced simultaneous shock (so many securities around) and relief when these ‘securities’, i.e. another Ponzi disappeared.
Current point is quite similar to the past except one critical addition. Now it is politically incorrect to allow Ponzi schemes to disappear, because they are too big to fail. As a result, system still gets a shock when it suddenly sees how many "securities" are around, but they are not going to disappear. It means that current money supply gets suddenly dwarfed by this "securitized volume", and critical shortage of liquidity, i.e. US dollars, materializes despite all printing presses, i.e. nobody wants securities anymore and everyone wants cash.
It means, in practical terms, that real inflationary environment is not quite reachable. Governments will try to increase liquidity but it will be immediately sucked away by standing Ponzi schemes, i.e. real economy will be subjected to severe deflation. What governments around the globe try to achieve now are attempts to put deflationary jinx back to the bottle, i.e. make people believe that all collaterized debt obligations, credit-default swaps and other similarly called black holes do not really exist because government "takes care". Any new liquidity, e.g. dollars will be immediately consumed by another batch of “securities” that must be bought by governments, no matter what.
The only way out of this morass would be accepting inevitable; let Ponzies, i.e. banks, insurers, Fannie and Freddie, etc. fail and simultaneously print money letting inflation out of gate to float real economy through tough times, i.e. inflation. In other words, in free market it would be inflation, and may be hyper one, but this market is not free. The more realistic, in political terms, path would be a long and painful depression with no light ahead. As it is known, Great Depression continued till WWII, i.e. longer than 10 years, and stopped due to non-economic factor (war), i.e. hardly a good outcome.