Sunday, February 28, 2016

Deflation (Poverty) Is Accelerating Out of Control

The 2008 mega-dunce response to global poverty was to increase the output gap...

Treasury yields with the casino

Global poverty is now predicting the price of oil

Below is U.S. deflation (red) with oil:

Prior to 2008, they were not strongly correlated, now they're 1:1. In other words, the output gap that is self-evident in oil is manifesting itself across every part of the economy - oil, commodities, manufacturing, services aka. "wages".

But, but, but, the strong dollar is correlated to both deflation and oil. Right?

Not anymore. Deflation is now beyond what the (inverted) dollar (black) would predict. And hence oil above, is also below what the dollar would predict as well.

The monster is off the leash...

All of which means that deflation is out of control. And the real deflation hasn't even arrived. Yet.