Deflation, inflation? Where are we?

[brencat]

Looking at fiscal and monetary policies, one would think we're in a period of deflation. And I suppose housing prices are still dropping. But how can we be in a period of deflation when prices of almost everything but housing are increasing, and the dollar itself decreasing? And if we are facing inflation now, why are we continuing to inflate?

Fed is scared sh*tless about deflation. But they are pushing on a string in a desperate attempt to get risk takers back into the game of overvaluing real estate and stocks so that our forward expectations of inflation are positive instead of negative (deflation).

Frankly, I think the Fed ultimately loses this battle. Deflations are a necessary evil following credit bubbles like the one we just had to purge the system of all the bad debt. Encouraging people to speculate to overvalue assets is sooo 2005-2007 and is incredibly dangerous. Sadly that's what our country has become. Where the best minds no longer make things, but financially engineer products designed to get us to borrow money and overvalue assets.

If the Fed actually succeeds in creating inflation, it will be almost impossible to stop given the amount of stimulus currently in the system. Deflations are safer...everyone loses together and arguably the rich lose more faster as deflation crushes most investments (except cash), including hard assets like real estate and metals.

On the other hand, inflation is much more dangerous. Those with means bid up everything that isn't nailed down. Owners of real estate, stocks, metals, etc, profit massively while the have-nots pay more for food, energy and essentials, creating shortages and thereby widening the income disparity further. Despair and jealousy of the rich become the order of the day. Crime increases.

No sir. If it can only be black or white, I'll take deflation over inflation any day. Inflation gets people killed.

 

[BigDH01]

What an attitude! Calling saving by this lurid name of “mattress stuffing”! What next? Why not go door to door with police to take the dirty mattress money? Inflation is not any different, it is involuntary, and backed by the power of the state.

An attitude? It's not an attitude, it's an understanding of how economics works. What do you think would happen in a period where everyone is saving their money by hoarding it? Prices fall and everyone hoards even more with the expectation that goods will be cheaper tomorrow. Pretty soon, everyone has a jar of money but no one has a job.

I'm sure this is one area where you'd choose Rothbard over Friedman through, right?

If you ask me to choose between small amounts of inflation or deflation, I'll choose inflation every time.

What I am actually promoting is a system where we have stable inflationary rates at about 2%.

Money has two main purposes: medium of exchange, store of past work (saving). People should be allowed to save their work however they want.

Surely, you've heard of inflation-linked bonds.

You are saying that “the economy” is better served by heating up their seat until they start hopping around and trying to give away their money like it was uranium banknotes. How is this reasonable unless you are some kind of fascist?

The economy is better off by encouraging people to use their money for some productive use and by targeting small controlled inflation. If the public wants to buy TIPS, they are more than welcome to.

You can cry that I'm a Fascist all you want, I won't apologize for not learning economics on YouTube.

 

[LegendKiller]

Takes a while for all the newly printed dollars to circulate and for price inflation to occur. It is not a matter of if, but when, hyperinflation will occur.

Our fractional reserve system and the federal reserve are the root cause of inflation. There was a point in time where the dollar was rising slowly in buying power, from 1832 to 1913. Since 1913 the dollar has lost 97% of it's purchasing power.

Purchasing Power doesn't matter. PPP is all that matters and, from PPP, we are doing just fine.

 

[LegendKiller]

You answered your own question, your dollar sucks dick so imports cost more, and your manufacturing industry is anemic at best so you are prey of other nations.

Our manufacturing base is still as large as an absolute dollar amount is as strong as it was before. However, layoffs due to productivity and automation has resulted in lower employment. Furthermore, the expensive dollar relative to other manufacturing nations has caused offshoring, a cheaper dollar will result in the opposite, including increasing the relative value of US exports.

I would believe the exact opposite, without US consumers, every country is prey to the US. With cheaper US goods and services, every country is prey to the US.

Keep in mind, the US is still the worlds largest manufacturing, agricultural, and IP economy.

As far as commodities increasing in price due to "inflation". Oil, probably the best bellweather for inflation, has increased in price, but not much. Gold is too prone to speculation. Grains are being hammered by Russia and US delivering poor crops.

Monetary inflation isn't the only type of inflation out there. Massive supply drains as a result of poor crops can drive prices up well outside of monetary inflation.

 

[Acanthus]

We are staving off rapid deflation with very cheap money from the fed.

Trillions of dollars of wealth was destroyed in the housing crisis.

As others have said, food prices are from a bad harvest.

 

[LegendKiller]

We are staving off rapid deflation with very cheap money from the fed.

Trillions of dollars of wealth was destroyed in the housing crisis.

As others have said, food prices are from a bad harvest.

The wealth that was "destroyed" shouldn't have existed in the first place, thus nothing was really "destroyed". Much of it was paper wealth anyway.

 

[piasabird]

The biggest drawback caused by congress is they did not make the Bush Tax Cuts permanent. Congress can approve a tax increase at any time they want, so just make the tax cuts permanent now. No Guts, no Glory.

 

[LegendKiller]

The biggest drawback caused by congress is they did not make the Bush Tax Cuts permanent. Congress can approve a tax increase at any time they want, so just make the tax cuts permanent now. No Guts, no Glory.

What, exactly, did those tax cuts do for this economy? If you take 2001 and look at 2010, we went nowhere with the tax cuts.

Tax cuts are the faux panacea, it's like saying if you put high octane gas into a Toyota Tercel, you're suddenly going to get an extra 200hp.

It doesn't work, not now, not ever.

 

[dank69]

What, exactly, did those tax cuts do for this economy? If you take 2001 and look at 2010, we went nowhere with the tax cuts.

Tax cuts are the faux panacea, it's like saying if you put high octane gas into a Toyota Tercel, you're suddenly going to get an extra 200hp.

It doesn't work, not now, not ever.

Yet millions of republicans still cling to this talking point.

 

[Acanthus]

The wealth that was "destroyed" shouldn't have existed in the first place, thus nothing was really "destroyed". Much of it was paper wealth anyway.

I agree, but that doesn't mean it wasn't playing into the price structure, especially on high end items.

 

[ElFenix]

The wealth that was "destroyed" shouldn't have existed in the first place, thus nothing was really "destroyed". Much of it was paper wealth anyway.

problem is that people make "real" plans based on "paper" wealth

 

[BoberFett]

http://en.wikipedia.org/wiki/Biflation

 

[dmcowen674]

Looking at fiscal and monetary policies, one would think we're in a period of deflation. And I suppose housing prices are still dropping. But how can we be in a period of deflation when prices of almost everything but housing are increasing, and the dollar itself decreasing? And if we are facing inflation now, why are we continuing to inflate?

Expect double-digit inflation and of course it's all Obama's fault.

 

[BoberFett]

Expect double-digit inflation and of course it's all Obama's fault.

It's your fault Dave. Inflation happens because you touch yourself.