Inflation or Deflation?, Dow +/-200 Point Days

Inflation or Deflation?,  Dow +/-200 Point Days

Inflation or Deflation?

A Seeking Alpha article Saturday asked the question 'Inflation or Deflation?'.  The article discussed the fall in the U.S. CPI in June and what the auther sees as the role of retail gasoline and heating oil prices as a principal influencer of this.  He then goes on to discuss Food Prices, Health Care, Housing, etc., and concludes:

·        deflation is 'insidious';

·        the U.S. is not there yet; and,

·        it is imperative the U.S. avoids deflation 'at all costs'.

I commented on the article as follows:

From my perspective it is too early to tell whether 'deflation is upon us'. That said, if we do experience meaningful deflation, the consumer's unwillingness to spend in a deflationary environment on necessities will have nothing to do with his/her 'spending timing'. The spending that will be deferred or (I think more importantly) curtailed will be spending on non-necessities. Government's will realize less tax revenues than they do even now, and government sponsored infrastructure (roads, bridges, subways, water plants and sub-systems, etc.) will deteriorate over time from lack of funding, and public services (garbage collection, policing, fire protection, etc.) will run a serious risk of likewise deteriorating from the points of view of equipment deterioration, employee morale and and employee/population ratios.

It seems to me standards of living in developed countries will deteriorate in this economic environment in either an inflationary or deflationary environment, but are likely to deteriorate even more in a deflationary environment than they are likely to in an inflationary environment.

Once again, I see the article as 'U.S. Centric', although if the U.S. economy turns deflationary in a serious way it will affect all world economy players negatively to varying degrees.

Dow +/-200 Point Days

Here is a neat Chart posted a few days ago that shows the number of days in each month from January, 2008 through July 16, 2010 the Dow was either up or down by +200 points.  If you are an equity markets participant I strongly suggest you click 'Dow 200+ Point Up/Down Days Update' - reading time 3 minutes - and see if you agree with the view I have drawn from the Chart which is:  That the pattern of up/down days in May, June and July (to date) in 2010 looks a little bit like the pattern in June - September, 2008.

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