Monday, May 9, 2011


I think there's a good chance that deflation could strike again. Has the world already forgotten 2008?

I think my short-term inflationary mood (as seen in the upper left hand corner of this blog) will be moving back to deflationary in the not too distant future. Part of me wants to do it right now but I figure at least some of these higher prices will trickle into the CPI. I figure that gives me a month or two. Maybe.

I have no crystal ball. Keep that in mind. These are uncertain times and I remain uncertain. I can say that I have no desire to make a heavily leveraged bet that copper prices will skyrocket from here. That alone should make me deflationary.

December 2, 2008
Metal prices fall further than during Great Depression

The price of key industrial metals has fallen further over the last four months than occurred during the worst years of Great Depression between 1929 and 1933, according to research by Barclays Capital.

Here's a 2008 glimpse of how risky copper could be right now.

Source Data:
USGS: Historical Mineral Statistics
BLS: Annual CPI
Kitco: Base Metals


mab said...

I think there's a good chance that deflation could strike again. Has the world already forgotten 2008?

I know we disagree on this, but deflation never left us. Sure the CPI moved up slightly (based on speculation imo), but house prices are plumbing new lows.


A typical home owing family sees an increase of few % in CPI goods over a 3 yr period while their house price drops $200K and wipes our their entire net worth. That's not inflation in my book. And it doesn't bode well for future inflation either.

Stagflationary Mark said...


We don't disagree much. I've been tied to inflation hedges ever since you've known me. I'm not exactly making out like a bandit. Gold and silver treated me well but much of that was simply offsetting my home's price drop as you point out.

Had the CPI been tied to housing prices instead of rents I would have been much more reluctant to invest in TIPS in recent years.

My inflation mood is mainly linked to the CPI, since my investments are. I think it will probably run hot for a few more months and then fizzle. I even agree with Krugman on that. Go figure.

One thing we definitely agree on is that we are not experiencing hyperinflation right now. I certainly don't see the price increases many seem to see. My personal expenses still show tame inflation. There are a few exceptions but they are minor.

Mr Slippery said...

Copper is a great investment if you buy it in coin sized legal tender form. No deflation risk, near zero transaction costs. Nickels FTW!

Stagflationary Mark said...

Citigroup figured out how to reinflate today. They got their stock price up to roughly the same point it was when I got out in 2004. Amazing!

Behold the power of a 1 for 10 reverse stock split, lol. Sigh.

Charles Kiting said...

I expect us to do the exact same thing as Japan 20 years prior. Short-term roller coasters, long-term running in place.

Stagflationary Mark said...

Charles Kiting,

Japan opted for a treadmill.

I have a solution so we aren't just like them.

If we can just add some inflation then we can upgrade our exercise equipment to a stair climber.

Who doesn't like climbing in place for all eternity? Woohoo!

Charles Kiting said...

George Jetson opted for a treadmill too. That's the only thing the cartoon predicted correctly.

Stagflationary Mark said...

Charles Kiting,

You've got me there. Stair climbers are just too barbaric for a modern society it seems.

Detroit has really embraced treadmills. Check out their airport. To be fair, these treadmills actually take you places though.