There is a lot of headless chooks running around, telling investors that we are suffering from the risks of deflation. These headless chooks can be found on CNBC or Bloomberg, at the Federal Reserve Open Market Committee or at ZeroHedge.com, or for that matter any other random blog that is predicting the end of the world. Others are pointing to the Treasury Bond market, saying that deflation is now priced in and that the collapse of assets is about to follow. This is a total load of garbage. Please consider the two charts below:
Thanks to Doug Short (short.com), we can see that inflation in general has increased between 25 to 34% in the last decade. On the other hand, the whole decade super bears have been talking about deflation. So where is it?
Education, energy and medical care has actually increase over 50% in that period. The source here is the government body (BLS), so if you are like me and don't believe these bogus figures, you would probably agree that inflation has actually increased substantially more. Much much more.
John Williams over at Shadow Stats still keeps tabs on the way the old CPI was calculated before Reagan era. Here, it is quite obvious that inflation could be running north of 10% as of last month. And you should also noticed that inflation has not been below 5% since the 1987 stock market crash!
Here in Australia, and for that matter in majority of Asia, premium unleaded fuel prices are higher than a year ago - and I have daily experience with that. Education fees are higher than a year ago - as I saw my brother's university fees. Medical products are higher than a year ago - as I buyt certain medication for my father.
Since I eat like every other human, maybe apart from Ben Bernanke, I have noticed that food prices are much much higher than a year ago. When I travel, I notice that plane tickets are higher than a year ago. Even the firm that pays for me to fly to the mines, is paying higher plane tickets than a year ago.
Monthly rents in Australia or Hong Kong are much higher than a year ago and so are the house prices. I even noticed that prices for washing your car are higher than a year ago. I don't know anything that is actually lower than a year ago... apart from US Government Bond Yields... which brings me to the next point.
There is no deflation, unless you are living on Mars, and clearly Treasuries are in a speculative bubble, pricing in more quantitate easing. These bond traders are addicted to bidding up pricing of bonds and than off loading them back to the Fed for a profit! If we truly were facing a deflation collapse right in the face, the Treasury yields wouldn't be the only asset making new lows below the 2008 low. Crude Oil, Copper, Global Stock Markets, Euro, Aussie Dollar, Gold, Silver, Wheat, Corn, Sugar, Heating Oil and many other assets would be joining in.
Eventually, Helicopter Ben will print more money and these bonds will reverse course once more as the Fed starts buying: creating a game of cat and mouse as Wall Street bankers front run the Fed for a nice profit on a long Treasury trade!