The Great Deflation

[JS80]

Originally posted by: Vic

Originally posted by: JS80
all sorts of fail in this thread

People love money and usually fail to understand that it is an abstract with no inherent value of its own. Deflationary pressures cause people to hold onto their money, and discourage investment and spending in other economic areas where it would be more useful, like consumers buying goods, or employers creating jobs and purchasing inventory.

IMO, the 3 most important things people can learn about economics are:
- Economy = activity. Without activity, there is no economy.
- Money is an abstract, a medium of exchange with no value of its own.
- There Ain't No Such Thing As A Free Lunch.

+1 nonfail post

 

[wwswimming]

Originally posted by: BansheeX
None of you know what deflation and inflation are, you're using Keynesian definitions. Deflation is contraction of the money supply, inflation is an increase in the money supply. This can have effects on prices, but prices are the effect, not inflation and deflation itself.

"Deflation is contraction of the money supply" - per capita, or as an absolute number ?

"inflation is an increase in the money supply" - per capita, or some other definition.

the Velocity of money also enters into it, how often money changes hand, related
to what some economists refer to as the "multiplier effect".

it looks like there's more than one definition. you have to give some weight to how
the terms are used in our society. for most people, inflation is when prices go up,
deflation is when prices fall.

if that is technically incorrect, what other term would you suggest for the
circumstance where prices go up ?

without transparency, how does one define "the money supply" ? go to the
Fed website, and there is more than one definition for money supply. M1, M2, M3.

the money supply was increased during the years when real estate prices rose
and half the country was "making money in real estate." is the money supply
decreased when real estate prices fall ? part of the situation is that many of
the financial institutions involved are not declaring all of their holdings.

financial derivatives, also relevant to a discussion of money supply, make the
situation 10X more complicated.

someone please buy me a Core i7 940 so i can figure it out better.

 

[Slew Foot]

Originally posted by: Vic

Originally posted by: JS80
all sorts of fail in this thread

People love money and usually fail to understand that it is an abstract with no inherent value of its own. Deflationary pressures cause people to hold onto their money, and discourage investment and spending in other economic areas where it would be more useful, like consumers buying goods, or employers creating jobs and purchasing inventory.

IMO, the 3 most important things people can learn about economics are:
- Economy = activity. Without activity, there is no economy.
- Money is an abstract, a medium of exchange with no value of its own.
- There Ain't No Such Thing As A Free Lunch.

Problem is, is that most of the recent economic growth of the last decade was done on credit cards and home equity, not personal income. Now that the bills are coming due, people are screwed. Amazing what happens when you you actually have to have the cash on hand to buy the crap you want.