gold $us880 .. , page-59

BH,

Yes, I know the definition of "text book" deflation - a decrease in goods and services or even a decrease in the money supply and credit.

This is exactly what I'm seeing. We simply have not had the knock on effect from the massive price drops in raw materials, oil, gas, fertilizers etc etc.

Food and energy prices will continue to have a strong downward influence particularly when they finally respond to the fall in the above prices.

Money supply and credit has contracted through "wealth destruction" even with governments pumping more money supply into the system. It's not going in as fast as it's coming out. And as I've said many times before - there is no demand for credit, meaning it's decreasing.

We also know that China has been selling deflation for years and will continue to.

Deflation is looking like a bigger problem in the UK and China but it may happen here also. I just feel it's much more of a concern than inflation. Of course next year is another matter altogether.

For another text book term, we are in "disinflation". - when the inflation is decreasing but remains positive.

One more thing, obviously Governments will try everything they can to stop deflation with all this debt. Lowering interest rates is the main deflation fighter but those countries with zero rates will have to find other resources as they're doing now. Australia has a way to go yet.

Paladin - "Costs of many products will need to rise to keep ailing businesses alive. Look, for example, especially to things like the cost of electricity which I think are set to massively inflate during '09"

I think you'll find that was last year when energy prices were going through the roof. Electricity should not rise at all now, it should decrease. We will see if they pass on the decreased costs.

As for keeping ailing businesses alive, well that's life if they can't keep costs down and survive. Many are falling by the wayside.

Interesting times we live in. We are living history. Hehehe

Happy Australia day.