The Fear of Deflation

[gaelic cowboy]

The thinking is probably that if money deflates then it would be better to invest it or spend it on something that give a later return. The hoarding of government capital injections and of stimulus money by banks is killing SME's and private individuals who wish to open a business. This would appear to encourage lending to the correct people as property investment in a deflating market would be unwise however it ignore the fact that the money owed presently will have to be paid back with useless monopoly money.

[ICantSpellDawg]

Their IS such a thing as "painless" inflation and deflation. If it is a controlled descent or ascent we should be able to cope with the adjustment. My point is that all of our heads should be able to figure out a way to make deflation work in the short term since it seems like it is inevitable on the global scale. Everyone has known that as economic security and education increase in the developing world there would come a time when we would reach a relative parity. We had all hoped that the parity would come in the form of mutual inflation and economic growth, but it seems rather sensible that it would, instead, come from our economic faltering while the guys behind us caught up.

We've come to a point where the distinction between a white collar job in the U.S. and India is negligible, except for the massive savings India provides. Often, the help I would get from Americans in the South or inner cities will be sub-par to the help I get from India or the Phillipines. Years ago this wasn't the case. There is no future but to lose service jobs abroad until we reach parity. We are in for a long haul of job losses and we need to realize it. Bright human beings will eventually hold the better jobs no matter where they are in the world and no matter what their background is. Honestly, have we not seen this coming? There has always been a choice - embrace globalization for long term exponential growth and equal opportunity (which would come with a loss of purchasing parity, job losses and a reduction in rampant consemerism in developed countries) or close off from global trade using protectionist/imperialist policies that subjugate global upstarts and potential opponents. The US polity doesn't have the stomach to step on the necks of those less fortunate than us, and so the former way is inevitable, unless we revert to our more base natures.

My point is that we need to embrace a highly stingy and cost-saving mentality and extreme technological innovation that will allow us to lose pay, lose jobs while increasing our quality of life. I think it is possible.

[a completely inoffensive name]

When it comes to the economy, any changes somewhere, somehow, hurts someone. If you mean painless in that the majority of people will receive a neutral or positive economic influence due to the shift then say that.

[ICantSpellDawg]

Every time you touch something, skin cells around your hand die. I would call that painless. If a small enough number of people are hurt, that is the name of the game.

[a completely inoffensive name]

Every time you touch something, skin cells around your hand die. I would call that painless. If a small enough number of people are hurt, that is the name of the game.

That is a terrible analogy. You are comparing the financial stability of people for years to come when the economies money supply shifts from expansionary to contraction to the top layer of skin cells dying without triggering pain receptors in your hand?

Also, define small enough.

[Tellos Athenaios]

That is a terrible analogy. You are comparing the financial stability of people for years to come when the economies money supply shifts from expansionary to contraction to the top layer of skin cells dying without triggering pain receptors in your hand?

Also, define small enough.

Especially considering that the cells were dead to begin with: all top-layer skin is like dandruff waiting to peel/fall off. For a lighter note, consider that the next time you look upon your beloved ones: (most of) the features that inspire your emotions are dead.

[Slyspy]

Every time you touch something, skin cells around your hand die. I would call that painless. If a small enough number of people are hurt, that is the name of the game.

Would this be a Five Year Plan?

[ICantSpellDawg]

100 year plan.

[edyzmedieval]

Deflation must be avoided.

It drives down prices and it creates a so called deflationary spiral which the Japanese still did not manage to eradicate after more than ten years of dealing with it. The "animal spirit" as pioneered by Keynes, or the expectations of the consumer, are acting against the interests of the country - they expect the price to decrease so they put off spending for the future. Problem is, prices go down and down until they are no longer sustainable, and so companies collapse and Aggregate Demand in an economy falls below any sustainable level.

That is the main reason why we should avoid deflation. Not too mention it causes a severe shock in the financial markets, the loans suddenly become more expensive and before corrections are made it can take years, even tens of years.

Avoid deflation at all costs.

[Slyspy]

100 year plan.

My Five Year Plan comment was a reference to Stalin's economic reforms. For some reason your comments remind me of early soviet rhetoric.