My time frames...
Deflation, dragged out over 1+ decade if gov succeeds to zombify the system a la Japan.
Could be over a lot sooner, 1-3 yrs if gov stops meddling in the process of creative destruction.
After that inflation should be normal to above normal, I like the 3-8% range mentioned earlier.
I think hyperinflation is very low probability but cannot be ruled out given stupidity & hubris of our gov.

Deflation Now: May of 2009

The rate of inflation (CPI-U) has fallen to -1.28%, its lowest rate since January 1950, and the first time it has been negative since 1954.


Rate of Inflation since 1914
Through March 2009






=========================================================

Inflation in the Future

Printing money has always caused inflation in the past, and eventually the devaluation of currencies, so why not this time?

The answer is that it takes time for the effects to be felt, but count on it, they will be felt, as the following charts suggest.

This chart shows the monthly change in the Monetary Base -- the total quantity of circulating currency and bank reserves -- since 1998. In four months the base has jumped by 75%, and in fact it doubled from $900 billion to $1.8 trillion in the last eight months.

Monetary Base -- Monthly Change
Through March 2009



The arrows highlight the Y2K increase produced by Alan Greenspan in anticipation of a crisis resulting from possible computer problems, and the increase generated immediately after 9/11 for the same reason. Both of these increases were quickly reversed, but it still took a few months to accomplish, so as to avoid problems resulting from a sudden decrease in liquidity.




Think how long it will take to reverse the current flood of liquidity


The final chart in the series permits us to compare the current increase in the monetary base to what was done at the time of the Great Depression and during World War II. The plotts are logarithms so similar percent increases appear the same size. It is clear that the current increase is unprecedented both in size and speed.




Unfortunately, the immediate reaction to the 1929 Crash was to reduce rather than increase the monetary base, and that did much to deepen the recession and turn it into a depression. The first increase (left arrow) was made in late 1931, far too late to avoid serious problems, and the second was made in March 1933 after the election of Roosevelt. The two increases plus the continued expansion during the next four years generated a much improved financial life, but if you go back to the inflation chart above, you'll see that inflation rocketed by 15%, from -10% in 1934 to plus 5% in 1936.

The inflation caused the administration to quickly reduce the monetary base in 1937 (third arrow), which plunged America back into a depression that produced even more hardship than in the early years.

This is what we face now, an increase in inflation leading to an increase in gold is virtually locked in, but it may take a few years to happen. To make things potentially worse, there are $600 billion dollars of unspent stimulus money and a minimum of $1 trillion dollars of proposed new spending on healthcare anticipated in the next decade. Both will add to the deficit and both will result in an increase in interest rates and further inflation.

i couldn't agree more, there's always a lag then it explodes.

Deflation into 2010. Initially due to fractional multiplier then contraction of money supply due to higher interest rates. The fed will pick marginally higher rates across the yield curve over creating the perception that they do not have the will to reduce liquidity and prevent inflation. If they do this early enough and in the face of negative consequences for the economy, they will be able to control inflationary expectations with minimal economic damage. This would be as compared to the 80's where Volker had to raise rates to the moon before the market took him seriously. It's like getting a new puppy - if it understands from the beginning who's boss, things go a lot more smoothly.

from bespoke:

Country Inflation Rates

For those interested, below we highlight a big bar chart showing the most recent inflation rates for 77 countries. The average unweighted inflation rate for all of the countries is 4.11%. Fifty-nine countries are currently seeing prices rise versus a year ago, 14 are seeing prices decline, and 4 are flat. Venezuela has the highest inflation rate at 27.7%, followed by Kenya, Iran, Ukraine, Pakistan, Guatemala, and Russia. Ireland is seeing the most deflation with a year over year decline in prices of 4.7%. China has the third biggest decline in prices at -1.4%, while the US is right behind at -1.3%. Whether or not you use this chart to make any investment decisions, it does provide a good look at where each country stands in regards to price movements.

Yyb

Because there is some much debt denominated in US currency, we won't inflate seriously until the debt defaults or is paid down... the debt is the only thing that saves this economic situation from collapsing into serious inflation.

Here's my take:

Inflation = food (related items to grow and produce food), other consumables, energy, some medical (no choice - have to eat, stay warm and stay alive)

Deflation = everything else... including housing since we can just cram more people in less house... lots of used clothing and computers and other stuff sold to pay for food, energy and medical.

Enjoy the wild ride..

Deflation 4-6 years for anything that doesn't feed us. High fuel and energy costs. Home heating/AC will skyrocket.

Vehicle parts replacement and maintenance prices - UP. With possible real shortages of parts. Would be no sweat, if our stupid vehicles didn't have so much electronics.

Never again will we see so much worthless junk in stores. Insurance up, then probably down, as many of us try to go cash. Like Impetunomics says, a black swan or two, I predict at least ONE...will upend this. I say a natural disaster sort of black swan...making Katrina look like a drill.

I'm not class jealous or xenophobic, but I'm gonna be*****ED if any of our land, factories, or equipment (bulldozers, cranes) and all the stuff that is going to be idled for a decade, start getting bought en masse by the few that keep any cash, or from overseas like the Middle East. If I had a few bucks to buy a scissors-lift or cool tools and equipment, I'd start crusing the rental equipment shores. They bought TONS to keep up with the building boom, and are now stacked sky-high with scaffold, cranes, you name it.

Last fall I bought a 500 gal. and 120 gal. gas tank. Filled them, thinking SHTF was imminent. Might do so again, since I've used the supply.

hyperinflation in 5.

deflation spiral for ten years at a minimum. what the **** are you deflation for 8 months guys thinking? what do you think will reverse it? green shoots?

we are not posed on a recovery or growth economy in any way.

Deflation for a long, long duration (like Japan, possibly), as Hugh Hendry explains it. We have already had the inflation according to him.

Bread: 78 cents per loaf.
Eggs: 98 cents per dozen grade A large or XL
Milk: $2.19 per gallon

"It is not just the price of eggs that must be watched; but the availability as well." - A university student from Argentina. (Jan. 2009)

But look! Cigarettes are UP; therefore we must have inflation, no?
"Camel: since 1913."
R. J. Reynolds believed in an income tax.
Federal Reserve Bank of Chicago: founded 1913

Slutbarfer wrote..

My main indicator is that I have yet to meet anyone who believes in inflation who has more than a passing understanding or education regarding contemporary economics.

Yeah, because Warren Buffett doesn't understand money, right pal...?

Mark me down for deflation, by the way -- but we will turn, at some point, and when we do, the turn will be fierce. We're gonna need another Paul Volcker at some point in time -- I won't claim to know when.

Deflation for 2 years.

That's the force of the real world. I'm concerned that the Fed will actually try to monetize the debt. Without that possibility I see deflation for 10 years.

That's about what I've thought, Boz. Two good years of deflation followed by large amounts of inflation.

it's been a little over 3 months since i first posted this..

Just wanted to see if there were any changes to your opinions? if so why..

No Change.

Generally believe in classic Deflation scenario but have to again point out that Inflation and Deflation can, and will; co-exist simultaneously.

IMHO It simply cannot be a strict comprehensive either/or proposition with regards to ALL the valuations of ALL Assets/Commodities/Financial Instruments and Labor Classes....

Even a Black Hole emits certain types of radiation and in theory is characterized by fluctuating gravitational, temporal and other instabilities...

I envision the destruction of Credit and value to be a series of unstable temporary gravitational/emission inversions; many temporary and fast moving black holes in the Financial Landscape/Timescape that create eddies and waves of shock and asset/credit damage by warping valuations and disrupting mechanisms of commerce and financing that exist in the 'financial time and space' of Our Economic system...

Missed the post the first time around. Deflation, deflation, deflation. Probably a generation's worth. When ALL the debt is exposed and disposed of (defaulted or repaid) we'll begin the long slow climb out. Not until.

No change here.

Based on what I know personally, and for my purposes:

What I WANT == DEflation, the more hyper, the better.
What I think we'll get == INflation, one way or another.

The reason? Simple. Deflation would be too nice.

(Hyper)-deflation, I see as being like energy Perpetual Motion. It would be a very GOOD thing to actually achieve it in fact. It would signify the end of Scarcity, or at least a hefty relief of it, for anybody who manages to hold on to some bucks. Those bucks, by the very definitions of *-flation, would buy ever more stuff, which is the primary reason for acquiring them in the first place.

However, as attempts at Perpetual Motion have all failed to date (even the type of perpetual motion where the energy would be recycled from waste heat), so I believe that attempts at GENUINE deflation will also fail - for precisely the reason that it would allow a "free ride" just for holding on to some cash.

See, in order for everyone's purchasing power to increase like this, there must be a corresponding increase in the actual supply of stuff - MOST IMPORTANTLY the stuff that gets consumed (food, energy, et al). And there seems to be a chronic shortage of at least some of the critical things even if McMansions seem abundant at the moment. (And last Census data I saw, people still outnumbered houses 2.4 to 1.)

Well come to think of it, while bona fide perpetual motion is impossible, there is a way to approximate it for most practical purposes. The folks on the Depleted Cranium website assure us that there is enough nuclear fuel on the planet, if used sensibly, to last until the Sun begins its expansion to Red Giant stage, and that it can be secured for costs per BTU that are small compared to natural gas prices. We should also be able to get rid of scarcity by aggressively pushing tech for production and distribution, allowing larger wage to price ratios, and larger cash-on-hand to price ratios.

However, the behavior of everyone who might be in a position to effect such improvement is not conducive to it. In fact, almost everyone seems to be clueless about how to even define a good standard of living, let alone impliment it.

bumpity...almost a year since I first posted this..

im still sticking with my call and its been so far spot on.

0-2% inflation, with inflation picking back up in 2013. if any of you want to revisit your call, let's hear it.

When somebody asks "Deflation or Inflation?" the correct answer is: "Yes."

We have already had the massive inflation of assets. Those assets are trying hard to deflate in-spite of being propped up. And as that money gets scared and runs for cover you will see increasing inflation in prices in the Production and Consumption economy.

Here is a good model for what is happening:

http://fofoa.blogspot.com/2010/09/just-a....

Western Economies = Deflationary corrections

Asian Economies = Inflationary corrections, always.

There is not a single deviation so far in 300 years.

But this time, it may be different ! LOL

If Bernanke dies or leaves office, then deflation will occur. If Bernanke lives, then inflation will happen. Bernanke's reputation has been set in stone. Everyone knows this dude is a printer.

anyone want to change their tune now?

bump