We are having deflation at the same time as inflation.

Which seems like it’s impossible unless you understand that there can be barriers placed up between the two (at least initially). That’s what I believe is happening. All these trillions of dollars are going into certain things, and being mopped up so to speak. It’s not filtering down into the regular economy because it’s simply staying at the top and trying to shore up their derivative losses. Which I believe is around an average of 40 trillion per big bank -Citi, wells, bofa, goldman, etc. Of course this is also just what we know about. The numbers could be bigger.

But the EFFECT of doing this is leading to dollar debasing, and thus inflation. Now it isn’t as pronounced because, this isn’t liquidity inflation by the average consumer, this is liquidity inflation by the big banks needing trillions of borrowed money to stay relatively solvent. (even though they are ALL broke -derivatives). Mark to fantasy and the glut of homes not on the market (inflating house prices via less supply) are the only things keeping things going, and probably not for long.

Additionally it only takes one of these big mortgage holding banks to unleash a wave of their foreclosed homes on the market at low prices to stay solvent. They may want to hold onto them, but if they are about to go bust, I can see one of these banks throwing 500k homes onto the market overnight. Can anyone guess what that does to average home price? How that would then in turn create book losses in the trillions for every other bank that is holding onto mortgages but not selling them? One bank doing this could literally bankrupt them all - or start the wave that does so - but initially would probably still collapse a few banks immediately.

Now of course some of the hot money printed may indeed filter out and cause inflation the more natural way of having more dollars in more people’s hands. But if this happened it would doom the current plan, thus they are trying to keep inflation down by keeping all the ‘printed money’ in the banking/financial system. [They're basically trying to only inflate what was made worthless by the crash] Of course that’s pretty much impossible.

Of course we are seeing asset bubbles in some things coming back up, which means to me, some of the money is getting out. This is dangerous because everyone sees the stock market go up, but doesn’t see that it’s no gain in wealth, and is just one step away from this hot money inflating everything else around it until we’re once again paying bubble prices for everything. (but still being paid in 1997 wages, the few who are still working)

But overall when you look at things…here is what is happening…..

Deflation in the physical economy - you know real people, tangible goods, brick and mortar

Inflation in the financial economy - banking industry, derivatives, mbs/cmbs, trillions of dollars transferred around in seconds via cyberspace

So everything tangible is decreasing at an accelerating rate

But everything financial/monetary are exploding in inflation and probably soon into hyperinflation

One could almost say we are doing the most extreme ‘trickle down economics’, and it’s all getting dammed up at the top. So their things are inflating, while the rest of the economy deflates. The in between is the stocks/commodities.

The sad thing is that at some point, the hot money will fully infect everything and the costs of everything will rise, but everyone will be making less and cannot afford it. This will be a huge problem. So prices are going to skyrocket, as no one can afford a computer at it’s new 10,000 price, so we need to raise it to 25,000 and sell much fewer. All for something that is worth say 2,000 now. That’s what we’re facing happening everywhere and for everything we buy.

If you don’t destroy the money from all the ‘crap’, it not only keeps things inflated with a larger money supply, you set the stage for more inflation when ‘bailouts’ occur. It’s like double counitng the money.

Me as an outside observer thinks I’m simply watching shakespeare being performed in two different languages.

If you want to conceptualize it think of a baseball pitching machine on it’s side. One of the wheels is spinning upward (inflation at the top), the other wheel is spinning downwards (deflation at the bottom). If these two highly energetic spinning apparatus touch each other, watch out. That’s a big part of the coming crisis, when these two things meet, what is the effect? It’s not pretty I’m sure.

jmc

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