Wednesday, November 19, 2008
Those of you who have seen the chart below in these pages over the last year-and-a-half might have already guessed what it looks like after this morning's dramatic plunge in the consumer price index - it's now screaming DEFLATION.
Not that there's any real significance to the fact that it's screaming deflation.
As noted here yesterday, in a world full of fiat money, "deflation" is nothing more than an amusing side-show to the much more important financial troika of global deleveraging - collapsing asset bubble - global reflation, a sequence that has now been set in motion.
It won't be pretty to watch, but, in the end, you'll end up paying much, much more for nearly everything, everywhere. That is, once the "chain catches the sprocket".
As for the chart above, a simple substitution of the Case-Shiller Home Price Index for the nefarious owners' equivalent rent component in the Labor Department's nefarious Consumer Price Index reveals a year-over-year inflation rate of minus one percent.
That can't be good...
About the only thing that was keeping this measure of inflation/deflation out of negative territory earlier in the year was $150 crude oil.
Now that crude oil is closing in on $50 a barrel and there seems to be no end in sight for home price declines, look for this to dip further into negative territory next month.