{"id":520607,"date":"2010-04-08T10:09:47","date_gmt":"2010-04-08T14:09:47","guid":{"rendered":"http:\/\/www.businessinsider.com\/rosenberg-the-only-story-is-deflation-and-consumer-spending-is-only-up-due-to-mortgage-walkaways-2010-4"},"modified":"2010-04-08T10:09:47","modified_gmt":"2010-04-08T14:09:47","slug":"rosenberg-the-only-story-is-deflation-and-consumer-spending-is-only-up-due-to-mortgage-walkaways","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/520607","title":{"rendered":"Rosenberg: The Only Story Is Deflation, And Consumer Spending Is Only Up Due To Mortgage Walkaways"},"content":{"rendered":"

In this morning’s Breakfast With Dave note, David Rosenberg of Gluskin-Sheff<\/a> hits on a theme we discussed the other day<\/a>, about the impact of Obama’s “Extend & Pretend” mortgage policy.<\/p>\n

As originally argued by Paul Jackson at HousingWire<\/a>, it’s the fact that millions of families are essentially living mortgage-free which explains the seeming disconnect between sagging housing and rebounding consumer spending.<\/p>\n

Here’s Rosie:<\/p>\n

There is no better real-world example of this than in the airline business.  Have a
look at Summer Airfare Sales Are Back on page B1 of yesterday’s USA Today.
Shopping-Center Malaise in yesterday’s WSJ (page C9) is another example —
many things are “up” from last years’ detonated levels but what are not are
average lease rates, which have deflated 3% on a YoY basis.  Manhattan
apartment rents are down 6.1% YoY and property prices have deflated 7%, on
average.  There is no inflation in the real economy outside of gasoline, health
care and State taxes and all of these are actually deflationary drains on
consumer cash flow.   <\/p>\n

For the time being, strategic mortgage defaults and higher tax refunds are
keeping consumer spending afloat.  Yes, employment conditions have improved
but not enough ostensibly to prevent wage contraction.  However, when wages,
rents, property prices, credit and now the money supply are all contracting, it is
very difficult to paint an inflationary picture no matter what China is doing to
commodity prices.  Did you ever think we would see $145\/bbl oil in our lifetime
to then only see headline inflation (we’re talking about the PCE here for the folks
who despise the CPI) down to 2.0% and core down to 1.0% a mere two years
later?  The economy may be enjoying something of a statistical bounce just as
so many other post-bubble countries managed to do after the initial sharp
downdraft — but it’s like a rubber ball … it bounces up temporarily and then
heads back to the floor and then bounces again but with less veracity, to again
hit the floor and so on.  That is the economic performance and outlook — brief
bounces but the overall trajectory is down, not up.  The primary trend, and this is
definitely not in the mainstream, is one of deflation, not inflation.  The fact that
so many believe in inflation makes this theme that much more appealing.   <\/p>\n

Remember Bob Farrell’s Rule number 9: “When all the experts and forecasts
agree, something else is going to happen.”  The most dangerous thing anyone
can do right now is follow the herd mentality, and yet that is exactly what is
starting to happen.   <\/p>\n

But we have to wonder: can you actually get paid betting against inflation right now? Perhaps, but right now inflation expectations are extremely low. Sure yakkers are talking about inflation, but that’s not what the market is anticipating<\/a>.<\/p>\n

Join the conversation about this story »<\/a><\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

In this morning’s Breakfast With Dave note, David Rosenberg of Gluskin-Sheff hits on a theme we discussed the other day, about the impact of Obama’s “Extend & Pretend” mortgage policy. As originally argued by Paul Jackson at HousingWire, it’s the fact that millions of families are essentially living mortgage-free which explains the seeming disconnect between […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-520607","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/520607","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=520607"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/520607\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=520607"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=520607"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=520607"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}