Tuesday, December 9, 2008


My head hurts. For an engineer like me to make sense of the inflation vs. deflation crap is going to throw a vein in my noggin'. I'm understanding on a macro level what would happen is easy, what that means to my daily life is another story altogether.

I braved a few large retail stores this weekend, and even a mall. I hate malls. Malls are all that is evil in the consumer economy we have in the US. Even the store that sells useful gear - EMS Mountain Sports - is overpriced, and filled with yuppie camping gear. Yuck.

The one constant was how empty they were. Even the Mall Rats were absent, lending an eerie silence to the place. Even small children were reserved, afraid to wake the boogie-men from their tomb. Sunday afternoon, and I counted about 50 shopping groups in the place. That is absurd with the oncoming x-mas holiday.

My buddy recently got a second job at Dick's Sporting Goods, and even he was saying the place wasn't busy at all. I was their to take advantage of the Friends & Family sale, 35% OFF!, but not on Guns or ammo (boo!). I did pick up a bipod, a sling, and an archery target for short money.

Now Obammy on Sunday had this to say:
"We've got to provide a blood infusion to the patient right now to make sure that the patient is stabilized. And that means that we can't worry short term about the deficit. We've got to make sure that the economic stimulus plan is large enough to get the economy moving," Obama said during an interview that aired Sunday on NBC's "Meet the Press."
I guess the Fed has put the Fear of God into Obammy that deflation = Bad. So much so that he's willing to spend us into whatever comes after Trillions to keep us out of it. Now evidently you don't see Inflation for 9-18 months after an injection of surplus cash into our economy. Slow slide indeed. TARP was passed in October, So we should see effects of this reckless spending starting around June.

That's the trouble with the economy, it's not a linear equation. I see it as two major waves of effect, a bunch on small effects, and a trillion tiny ones. So buy pumping cash into the economy bailing out banks and automakers you get an immediate effect of a rally on wall street. Down the road you have another effect because of the surplus cash. I was a big fan of Chaos Theory long before Jurassic Park made it famous. In short, Chaos Theory deals with math that doesn't exactly add up. Very complex equations are used to model environments where a tiny, almost imperceptible change in one variable has a huge effect on the result. In other words, a Kobe cow farts in Japan and we get a tornado in the Midwest.

So every manipulation made to the economy has wide ranging effects down the road. Well all those changes made by Greenspan over the years has come due. The closer you come to the crash, the bigger a change you need to make to have an effect. As the ETA approaches zero, the amount of money needed to affect change rises to infinity.

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