Comments for Should Investor worry about Inflation or Deflation? »
Posted By WikiMap 7 months, 2 weeks ago in NewsWhat’s going on with our economy? First, we have to acknowledge that we are in a secular bear market. We may be here a long time. Are we starting disinflationary spiral, a growth phase or approaching that dreaded inflation scenario?
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gamezireComment removed: Hard Banned
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calitennflo7 months, 2 weeks ago
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When one is enabled to perform...performance rises...when onme is enabled to produce...one is productive...this type of philosophy applies here too...as when one uses methods, such as a true democracy provides...a leaf has worth...and the single pieces of stone have worth...when before...they cost too much to seperate and use.
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Money must always be removed before forming an opinion. -
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tadair9197 months, 2 weeks ago
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this author almost gets it.
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deflation is not a drop in prices. the drop in prices is a symptom of deflation. (many things can cause prices to drop.)
deflation is a decrease in the money supply which causes prices to drop because the relative scarcity of the money makes it more valuable.
(by contrast, inflation is the increase in the money supply which creates the illusion of rising prices because the relative influx of the money makes the money less valuable.)
also, so long as companies remain efficient, this is not a bad thing because they are benefiting from the drop in prices, too.
in short. fear inflation, runaway inflation, and hyper-inflation. welcome deflation, except the unnatural kind governed by the fed.)
read hayak.-
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beavith17 months, 2 weeks ago
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tad.
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deflation is perniciously destructive. its the one thing that Keynes got right. the paradox of thrift -something that we are living through now- shows up as job losses and a sharp decline in economic output that can spiral downward out of control.
inflation steals the ability to save. deflation destroys economies. look at Japan in the 1990s.-
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tadair9197 months, 1 week ago
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i said, welcome deflation "except the unnatural kind."
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japan in the 90s used a central bank that artificially created deflation.
you can't have bad deflation without a fiat currency and central bank controls.
during the great depression, friedman also cites this as precisely the reason why it continued. it was the the federal reserve residing over the quantity of money that caused the depression to continue.
we are blaming the symptom, instead of the system.-
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beavith17 months, 1 week ago
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the JCB pumped money in thanks to the burst real estate bubble and collapse of collateralized instruments as a result of that inflated real estate value.
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they were pumping money in to prevent a full bore textbook deflationary collapse.
its very much the same policy that Bush/Obama/current Congressional leadership are using. FDR/Keynes used pump priming to defeat deflation in the 1930s (or so the curretn geniuses think), so 'that's what we have to do in the 2000s.'
i fail to see any evidence that pumping money into the system like this does anything, except run up long term bills.
as ssfaher shows below, inflation isn't a real threat with a flat-on-its-a$$ economy, as it is now.
deflation, i must differ with ssfaher on this, isn't contingent on population. its contingent on businesses trying to clear inventories that are shackled to the business' cash flow. if they can lower prices to recover most of their investment, the consumer buying dollar becomes more valuable tomorrow. that slows V even more when cash buys more tomorrow than it buys today. inventories shrink. when they get replaced, they get replaced at lower quantities, shrinking the marginal job base.
a couple iterations of that and you have fewer jobs and fewer dollars chasing static or fewer goods. its ruinous.
those footsteps you hear in the fog are deflation stalking us. and its got a big knife in its hand...-
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tadair9197 months, 1 week ago
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with bush and obama literally printing up trillions of dollars (and making book entries), increasing the money supply of US Dollars, then how do you get that it is deflation knocking on our door?
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you can't have inflation and deflation.-
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beavith17 months, 1 week ago
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what we're seeing is nothing but flailing about.
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Bush/Obama is trying to inflate our way out of deflation.
that doesn't work. it didn't work in Japan. it didn't work in the 1930s.
the downward pressure on pricing, along with a struggling lending portion of the economy means that we are, at best, treading water.
i've used a chest wound analogy before. the only reason that the economy has some semblance of function is that the Treasury and Fed are pumping money right into the heart of the economy. problem is, the whole right side of the chest is missing.
the patient is still alive, but only technically. the minute the money spigot is shut off, we crash.
hell if i know what to do. doing what were currently doing is not even wrong. until we can fix the banks' impaired balance sheets, we're just kidding ourselves. go back into the market? right now? notachance.-
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tadair9197 months, 1 week ago
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the same people who convinced you that the federal reserve is keeping us afloat were the same people asking for dictatorial powers over the economy.
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the federal reserve bankers are the ones who are spouting this nonsense, why are you believing them now?
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beavith17 months, 1 week ago
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a slow economy with rising prices is called stagflation. i lived through that once. don't want to do it again. there are solutions to it, although, with current interest rates so low, the toolbox sin't very full of tricks to reign it in, without some very painful choices. Volcker sent us into the recession of 1981 putting the brakes on M1 growth. the intentional recession (depression?) needed to beat this current thing would be bloody. politically and economically..
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a slow economy with falling prices is new economic territory, requiring new economic theory. let's keep it simple. if i have a job, i'll choose that one. if i don't have a job, it really hurts my chances of getting another one. i wouldn't want that one.
your second choice is like that movie scene you've seen a million times. the hero is sliding down a hill, gathering speed, grasping at whatever he can hold onto, but finding nothing, until he goes over the cliff.-
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tadair9197 months, 1 week ago
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with lowering prices, so long as i consistently and efficiently kept getting better and better prices from my vendors, then my company would not be effected by it. merely cut wages to market demand.
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let me say it this way.
in football, would the game change if they changed the scoring system from 3 points a fieldgoal and 6 points a touchdown, to 300 points a fieldgoal and 600 points a touchdown? for that matter, .000003 points, and .000006 points?
nope.-
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beavith17 months, 1 week ago
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actually, that's what happens in hyperinflation when the banking authorities have lost complete control. qv Weimar Republic or Zimbabwe.
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dropping the zeroes is another tactic in hyperinflation to make the currency more convenient to carry, like fit in your wallet, not your wheelbarrow. for as long as that new currency holds some kind of realistic value. the zimbabweans had explosive hyperinflation and lopped off multiple zeroes three times in their current round of economic lunacy. its literally called the Zimbabean Third Dollar. heck. i stopped paying attention. maybe they are on the fourth or fifth dollar. its like watching a train wreck. fascinating and awful.
the Fed had a target of building in 2% inflation per year when times were more congenial. i suppose you could have the Fed say they wanted to build in 2% deflation per year, but they have no known way to control it.
efficiency improvement, with a stable currency, is great for the stockholders because that improvement goes to the bottom line and you see it as equity in the business. efficiency improvemnt in a deflating or inflating economy is a cheat to someone on either side of the equation because the value of the medium of exchange is changing with no regard to input. somebody benefits. somebody gets rooked.
i'm not ballsy enough to demand hard currency like a gold standard because that would be monstrously and immediately deflationary. fiat currency has its problems as long as someone has control of the levers of 'value' and performs as a masterful fiduciary. our current situation hit a singularity and no one has control over anything. the engineers are cranking levers pushing buttons kicking pedals and nothing is working.
wher ewe go from here is anyone's guess. if anyone tells you they know, they are lying.-
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tadair9197 months, 1 week ago
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a gold standard would prevent what happened in zimbabwe.
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and i wasnt suggesting to hyperinflate the money supply by "dropping in zeros" this is an example of inflation.
deflation has the opposite effect. instead if a loaf of bread costing 2 dollars, it costs 1 dollar, then 50 cents, and in extreme hyper-deflation i suppose it could cost 2 cents. (the dollar bills would start looking like 0.000001 cent)
but that would have to come from an unnatural federal reserve mandated policy.
there is no way to do that on our own.
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ssfahrer7 months, 2 weeks ago
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Actually, you have to look at a classic economic formula:
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MV= PQ. M= the money supply; V= the Velocity of Money; P= the Price Level at any point in time and Q= the Quantity of Goods produced at said point.
What we have now is VERY low velocity of money (under 1, let's say). Any increase in M will have LITTLE EFFECT on either P or Q since V is so low. If V should rise, THEN and ONLY THEN can we even THINK about 'inflation' as being a potential problem. As long as unemployment is high (and it will be for quite a while), I don't think inflation will be a problem-- but neither will deflation, since there are still > 300 million Americans that have demands on the economy, but they won't demand as much, so no inflation. But as long as there are more births than deaths, deflation is not that great a danger.... -
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Natureboy7 months, 1 week ago
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What the investor should worry about is that the economy is petroleum driven, and by various experts calculations we are coming up on peak oil or have recently hit that point.
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Invest in arable land. Buy hoes and shovels. Hand tools will be enjoying a renaissance.
The economy has taken a dump, no doubt about it. But the energy picture means that the economy may regain its feet briefly, but will fall again, and worse.
Food will be taking a more prominent role in the economy. Energy efficient construction and home improvements will be important. The local will regain its ascendency over the global. -
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lloydm657 months, 1 week ago
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The president,and treasury know we we will have to have at least ten percent,unindexed inflation by next year in order to keep the deficit below two trillion dollars.I believe he has been banking on it from get go.I seen this happen under Carter,it's not pretty.You work hard you get a ten percent raise,iflation eats up the raise,and then cometh the tax man to tax the raise inflation ate up.
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Icantwait7 months, 1 week ago
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My Fellow Americans: Well,well,well, All the Economist are out with their text book concepts. Nice going boys but they only work in a Capitalist system. Unfortunately, Obama is a Socialist and with his policies and the ones he is now springing on our country failure is inevitable. High unemployment and getting worse, less tax money, Government paying all the bills from less tax money, more tax money demand for the unemployed, bills coming due, no money to pay them, Government prints more but the Buck loses value, businesses can't sell their goods have to raise prices. can't sell their goods have to lay employees off, thus lose money and eventually go out of business, more demand on the government for money, raise taxes, more unemployment compensation needed. Foreign countries want the money they lent us. Can't keep a strong defense, can't provide Government controlled health care, which is a very poor program, more sick people, more famine, more crime, more government control of your lives, less freedom. More Obama, more trouble. Hey! you imbeciles voted for the Dictator. Gooooooood Lucccccck. The Real American
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