The Fear of Deflation

[a completely inoffensive name]

You are more or less advocating for the dumping of all useless jobs and make companies live off only with the people they really need and take it off from there. Well, let's say 50% people leave. In the next 3 months another 10% are added, so its 40% unemployment. Companies are perfect right now, with huge profits.
But there's one problem - what do you do with the 40%? Back in the Middle Ages, you would either kill them or starve them. Or even better, the Plague.

The thing is, the Plague was the single best disease ever done to humanity and it was the horrible impact that led to the Renaissance. Fewer people, more food, more money to them. Back then, there was no medicine. But now there is - and today killing people doesn't go well.

So what are you left with? Try and manage the economy as much as you can so it can come to 3-4% unemployment. Right now you can't just clear the pool without having a communist revolution or a downright civil war. And in the end, who is going to buy all of the goods and services that the companies produce once there is no money available for more than 40% of the population?

Your idea doesn't stand, economics is a complex social science and you need to balance. Going to the extremes will only destabilise the system and bring it to collapse.

I love this guy.

[ICantSpellDawg]

There are a growing number of people who, economically, culturally and from a perspective of furthering the human species serve no useful function. But they want to be fed, entertained and breed.

Inflation helps deal with this problem better than deflation does.

I love it.

My idea was that other people, outside of the United States, would become consumers after our economy bottomed out. I'm just saying that we are burning out, about to expire 2 laps ahead of everybody else. It's only a matter of time before we are in a real race, we might as well relax and wait for the horde.

But seriously, It's plain to see that our only idea of how to get out of this is for prices to go up across the board and for people to become dumb consumers again. Everybody knows how cheap things can be purchased for now. Pandora's box has opened and we aren't done digging through the top layer for goodies, plus we have less and less money. Deflation lies ahead of us and we'd better figure out a way to cope with it instead of wishing for the economy that we don't have.

Or we could work harder for more money, which seems to be the idea of some.

[ICantSpellDawg]

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

Thanks, I got it. I love how the nazis had the "4 year plan". It reminds me of the skit where the hitchhiker is telling Ben Stiller about his answer to "8 minute abs". "7 minute abs". I can just hear Goebbels now; "If it doesn't work in 4 years you can have the 5th year FREE"

[PanzerJaeger]

The price of a Ford is irrelevant when it may breakdown quicker than it's competitors and still not be cheaper in price or running costs to the average consumer.

Actually, your average Ford is just as reliable if not more so than your average Japanese car, which is emblematic of American manufacturing as a whole. Of course, what with the rising Yen, your average Hyundai or Kia is just as good as well, and with less aggressive discontenting.

The boom period after WW2 disguised many lingering labor issues and American companies grew complacent based on their own hubris. The '70s and 80's destroyed any myth of American superiority and the nation went through a painful correction. The opening up of China in the 90's hurt even more.

However, those American companies that did survive have learned and adapted. It is hard to say what is actually "Japanese", "American", etc. these days as suppliers, factories, and even design houses are located all over the world and companies are increasingly adopting a globalist attitude. If we can agree that design equates to nationality, though, then American products are by and large on equal footing with the best manufacturers around the world.

[edyzmedieval]

But seriously, It's plain to see that our only idea of how to get out of this is for prices to go up across the board and for people to become dumb consumers again. Everybody knows how cheap things can be purchased for now. Pandora's box has opened and we aren't done digging through the top layer for goodies, plus we have less and less money. Deflation lies ahead of us and we'd better figure out a way to cope with it instead of wishing for the economy that we don't have.

Or we could work harder for more money, which seems to be the idea of some.

Dumb consumers or not, they power the super high advanced economies! Everyone has been battling over this, it's a textbook rule - when the consumer spending accounts to more than 75% of your economy, what do you do? Encourage them to spend!

That's not what they are doing right now. And THAT is what drives to deflation.
Everyone is saving money. No problem with saving, but what people are doing right now is basically hoarding huge stockpiles of cash which slow down the engine of the economy. Simple as that. Banks have huge profits now - why is that?

No lending - no demand, loans are tight because people can't pay.
Lower staff - lower wages.
HUGE savings accounts - cash in the bank!

The dumb consumer as you put it is acting standoff-ish because there's no future of tomorrow. Spending less is no longer an option in an advanced economy. It's far too big to scale down.