'Mish' Shedlock and Gordon T Long discuss a number of outstanding issues in
2016 that will become Themes in 2017.
Economic Challenge to Keynesian's
Mish is quite emphatic that:
"Of all the widely believed but patently false economic beliefs is the absurd
notion that falling consumer prices are bad for the economy and something
must be done about them. The BIS did a study and found routine deflation
was not any problem at all.
“Deflation may actually boost output. Lower prices increase real incomes
and wealth. And they may also make export goods more competitive,” stated
the BIS study.
It's asset bubble deflation that is damaging.
"In central banks' seriously misguided attempts to fight routine consumer
price deflation, central bankers create very destructive asset bubbles that
eventually collapse. When those bubble burst, and they will, it will trigger
debt deflation, which is what central banks ought to fear. For a discussion
of the BIS study, please see Historical
Perspective on CPI Deflations: How Damaging are They?
Meanwhile economically illiterate writers bemoan deflation, as do most economists
and central banks. The final irony in this ridiculous mix is central bank
policies stimulate massive wealth inequality fueled by soaring stock prices."
Reality Check Questions
1. If price of food drops will people stop eating?
2. If the price of gasoline drops will people stop driving?
3. If price of airline tickets drop will people stop flying?
4. If the handle on your frying pan falls off or your blow-dryer breaks,
will you delay making another purchase because you can get it cheaper next
month?
5. If computers, printers, TVs, and other electronic devices will be cheaper
next year, then cheaper again the following year, will people delay purchasing
electronic devices as long as prices decline?
6. If your coat is worn out, are you inclined to wait another year if there
are discounts now, but you expect even bigger discounts a year from now?
7. Will people delay medical procedures in expectation of falling prices?
8. If deflation theory is accurate, why are there huge lines at stores when
prices drop the most?
Unresolved 2016 Problems will become 2017 Themes
US Y-o-Y retail sales are trending down, 8 large US chains are closing hundreds
of stores, as inventories continue to grow during what we are told is a recovery.
What happens to retail sales and retail commercial real estate if the US
sees a recession in 2017?
US Y-O-Y RETAIL SALES CONTINUE TO FALL
A pile-up of nearly new cars returning off lease is set to cause trouble
for the US car industry and wreak havoc on used car prices and thereby pushing
lease prices up.
Pending Home Sales have stalled and housing starts dropped 18.7% even before
mortgage rates spiked.
Pending Home Sales Stall Even Before Mortgage Rates Spiked
- WAR ON CASH - Australia and India
Thousands
of people are demonstrating across India to protest the government's
sudden decision to withdraw large-denomination currency from circulation,
a move that has caused enormous hardship to millions of people
- PENSION BOMB - Dallas & Fort Worth are only the Beginning
Dallas Cops are retiring in droves to take lump sum pension payouts in fearing
of the money not being there (and it won't be!). Fort Worth, Texas also has
problems!
Market Over Valuations
- ROBOTS & DRIVER-LESS VEHICLES ARE COMING SOON
Truck Drivers Dominate Most Common Job by State
2017 Themes
Mish says the following are the Themes for 2017 which the consensus currently
believes will happen.
Mish says "don't bet on any of them happening!"
-
THREE RATE HIKES IN 2017
-
A STRONGER US DOLLAR
-
WEAKER GOLD
Mish would bet against all three!
