An Occasional Letter from The Collection Agency

By: Mick P | Thu, May 28, 2009
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24 May 2009

I told you so - The work of the Collection Agency goes main stream

Well, well, well. Here at the Agency we have spent a couple of years waiting for the US economic establishment to go public with the Deflation / Depression Recovery Plan, what we call The Eggertsson Theory and this week we got it.

Lucky subscribers can now take solace in the fact that the author was right and the small quarterly payments were worth the effort. I can take great pleasure in saying "I told you so", not because I want to inflate my ego but because I know some people took note of what I said and prepared their portfolio accordingly. That gives me a warm feeling inside, unlike Gordon Brown I didn't "save the world" but I did help some individuals.

Enough of the touchy feely stuff and back to the subject at hand, the public announcement that you, the public, will accept the threat of inflation because it's "less painful" than any other solution.

Can you say credible expectations of future inflation? Here it is then, in the raw and in the main stream media. Welcome to the public acceptance of Eggertsson Theory upon which the hopes of Keynesians and Monetarists are now completely reliant. The hope is that the public and business believe that the irresponsible actions of the Federal Reserve will cause an inflationary effect in the future and react accordingly.

Eggertsson Theory shows that the adoption of Quantitative Easing and Zero Interest Rate Policy is not enough to engender a defence against deflationary forces. What is needed is a change in the perceptions of market players, from the top to the bottom, allowing a change in spending and saving patterns.

I refer readers to this excerpt from The Future Actions of The Federal Reserve And US Govt Are Known, An interpretation of The Deflation Bias and Committing to Being Irresponsible by G B Eggertsson, made public in April 2008:

You know what's coming next.....

Dow Futures June 09:

Bonds issuance:

CPI - All Urban Consumers (B of LS):

Continuous CRB Index (CI ICE / NYBOT) - TFC charts:

Are we seeing the "FDR effect" take hold? It's an important question, remember back in 1933 the problems were not over for the general economy but that didn't stop the reflation of various markets. We are seeing a very similar pattern today which must be due to the same reason as the rise in 1933, the result of a credible expectation of future inflation.

It is no wonder we are seeing so many articles on blogs, sites and now in the main stream media talking of inflation.

Right now, for the medium term, I am looking for a higher low (a downturn this summer would do the trick) and on a breakout of the recent high I would look to take a position. However, if the Fed move to a tightening stance in the future I would return to capital preservation mode, anticipating a 1937 scenario.

 


 

Mick P

Author: Mick P

Mick P (Collection Agency)
About Collection Agency

An Occasional Letter From The Collection Agency in association with Live Charts UK.

For some years now I have written an ongoing letter, using macro-economics, to try and peer into the economic future 6 to 18 months ahead. The letter was posted on a financial bulletin board to allow others discuss its topic.The letter contains no recommendations to buy or sell, indeed I leave that to all the other letters out there and to the readers own judgement. The letter is designed to make us all think about what may be coming, what macro trends are occurring and how that will affect future trends and how those trends will filter down to everyday life and help spot weak or strong areas to focus on for trading or investing.

To contact Michael or discuss the letters topic E Mail mickp@livecharts.co.uk.

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