As I will continue to say until I am blue in the face, you can’t rather suddenly add 3.5 billion people to the free market (half the world’s population) and not expect the 700 million people in the developed world to remain competitive at dramatically higher wages than those accepted by the new arrivals.
As of September 16, 2011, the melt value of a U.S. nickel [the 5-cent US coin] is $0.0600409, which is 20% higher than the face value.
In the same week a received a 10%+ increase in my monthly rent for a spot in a parking silos in downtown Milan and a 7% fee hike from my cleaning service.
My deflationista stance is shaking.
But then on the other hand, also just yesterday, Tyler Durden at Zero Hedge had a justifiable freak-out over the NY Fed asking Primary Dealers for their thoughts on the size of QE2. According to Bloomberg, the NY Fed was asking the dealers how big they thought QE2 would be, and how big they thought it ought be: $250 billion? $500 billion? A trillion? A trillion every six months? (Or as Tyler pointed out, $2 trillion for 2011.) That’s like asking a bunch of junkies how much smack they want for the upcoming year—half a kilo? A full kilo? Two kilos? What the hell you think the junkies are gonna say?
I’ve been playing around on a simple google spreadsheet on debt sustainability. The math of an indebted country with little GDP growth and a primary (i.e. before interest payments) deficit is rough and will ultimately lead to a debt spiral. Interesting how people forget about the exponential dynamics of interests and debt.
[The Chinese] refuse to allow the yuan to strengthen because they know that once they do that it will mark the real end of the dollar era. So instead they are spending like crazy on infrastructure ahead of them allowing the dollar to plunge. Then the strong yuan will be employed to purchase all the commodities they need to utilize their infrastructure and the OECD gets priced out.
