SOS Flation Debate

SOS What will change my mind?

Bob Prechter (DeFlationist)

• He has nothing to support the inflationist



• only wrong if prices of everything increase



• that wouldnt be inflation, it is just a price increase (broken window theory based on stimulus)



• all ballooning of credit end up in deflation (like Japan)



• what causes changes from inflation to deflation, psycology, change of social mood which is capture by elliote wave, inplosion of credit and money

Harry Dent (Deflationist)

• use demograhics (dealt with fundamental) on top of elliotwave, commodities cycle down every 29 yrs, real cycle over last 200 yrs



• last bubble for gold going up to 1200 in 3 to 6 months, if it continue to 1600 until end of 2010, then he admit he would be missing something

Peter Schiff (Inflationist)

• complete change in Washington, to raise interest rate, allow bankruptcies, default on government debt, don't bailouts, FDIC is broke, (don't see that is happening)



• south sea bubble , Mississippi, deflate because of going back to gold



• no restrain in printing of money, in gold terms, so when fiat money cannot be rely on, they will turn back to gold

Marc Faber (inflationist)

• if there is a strong dollar, there will be deflation, which is unlikely



• don't see how the collapse of commodities with the dynamics from emerging economics



• Zimbawae example, how to pay back loan with such loans, deflation is saying gold may go 200 per oz, but did not happen for a while

Jim (Moderator, sides inflationist)

• daily consumptions goods price has increase



• creditors nation in 1930 & now is debtors nation in US



• deflationist cannot answer that in history any debtor nation by printing fiat money that does not end up in inflation



• government can change the rules (bailouts, fed's balance sheet, too big to fail)

MyView

• For deflationist, when prices of all goods goes up (including asset class), the it is inflation.
• For inflationist, who seems to focus on increase in daily consumptions goods is deemed inflation and gold price will go up
• Inflationist do not consider the implosion of debt (deleveraging) as a major deflation factor because they believe the government actions do not allow it, i.e. printing money, stimulus, bailout, too big to fail BUT deflationist is convince no major amount of printing of money can stop the deleveraging train because of the momentum theory = MV (money printed x velocity) Deflationist believe the velocity is very low, bank do not want to lend, and consumer do not want to borrow due to already high gearing they are in.
• Inflationist based on Agrentina, Zimbawae and German Models to defend their believe
• Deflationist based on South Sea Bubble, Tulip case and Japan as their model to defend their believe but inflationist said that the eventually when the fiat money does not work, they will somehow turn to gold.

This subject become the daily debates of so many experts. Whichever camp we choose will decide what we will put in our portfolio. But for long term, one we cannot miss is GOLD, because the printing of money will eventually reduce its purchasing power. The only problem is, how long does it takes to reach there.