Just like a stock, the cost of living does not go up in a straight line. Where do you think the average price of a house house, car, oil, milk, bread, cigarettes etc will be 20-30 years from now. Will they be deflated/less than today. (Your so silly)
You can't be serious! There are always pockets of deflation in the economy: right now buggy whips, housing and possibly some automobiles, and a few commodities relative to their highs, but overall there is inflation, not deflation. If there was deflation in the overall economy the US would have to pay on its debt with dollars worth more than the dollars borrowed. You know that's not going to happen! Haven't you noticed all those corporate subsidies in the form of tax credits for cars, appliances, and god knows what else? That, Child, is just an alternative to dropping money from helicopters. Since the days of fiat currency (1971) and routine deficit spending as a bugetary process, deflation is a no-no.
All of this your discussing about FED, what would it do to the value of the dollar against euro i.e.? (if you don't focus on hte crisis in Southern Europe) Btw if there's going to be deflation in the U.S. won't it make the dollar rise?
We are in a deflation and the Fed has been trying unsuccessfully to reflate; unfortunately for the Fed they don't really understand deflation as well they think they do. What they don't understand, and what some on this thread don't understand, is that deleveraging is deflation. Base money supply expansion is merely the predicate to inflation; fiscal deficit spending on consumption by government is a solvency and credit worthiness issue, not an inflation issue. Inflaiton requires that money be multiplied through credit formation, in order expand money in use in the private sector, to the point where it will show up in the price change indexes. The main driver, modulater, of credit supply is not interest rate, amount of base money at the Fed or 'willingness to lend;' the driver of money supply multiplied by credit expansion is the leverage ratio applied to tangible and financial assets. The reason therefore, that we are having deflation is that the leverage ratio on most assets is declining; aggregate credit is delining and assets that used to command a liberal leverage ratio are declining in value. The Money the Fed has pumped into the interbank and government finance system has simply pooled at the Fed in excess reserve accounts so it has no effect on the price change indexes. If it were not for emerging market growth and the Government borrowing money and giving it away to pump up GDP in an unsustainable way, asset values would have already collapsed. Nonetheless they will continue to decline as leverage ratios continue to decline and the Fed's attempt to reflate expires...note that price index measures, PCE and CPI, continue to decline even with volatility in oil and food,...and the 'Stimulus' spending waste will come to a forced end as credit worthiness becomes an increasing issue...and from Basell III to Financial Reform the call for decreased leverage passes as wisdom...be careful what you wish for...and oh, Lucky, I didn't say that we would deflation for ever, I just said we are having it now and it appears to be continuing and getting worse...but even though it won't last forever, that transition from uber leverage to deleverage is not going to be a walk in the park. If you really think we are having a runaway inflation...buy my house!....or buy oil futures...I'm on the other side of the trade. Presently, 2009 Porsche 911 GTs that were originally listed at $110,000 can be bought new for $65,000 cash...I'm waiting for $50,000.
Yep, that's my view, as well... Moreover, the deleveraging has just started, judging by what's happening in the Eurozone.
Decreased in relation to what and when? Gold is up on Euro money flight...it is discounting financial collapse not inflation. Austerity is a contraction with deleveraging deflation and the forced sale of inventories. The cost of debt is increasing...ask the Greeks...pay attention to our fund raising next week. The dollar is stronger becuase we are a relative haven of liquidity...long term the value of the dollar is an open question...you can't borrow to spend on consumption forever...currency strength ultimately depends on the real growth.
Mr BREEN...you are too focused on the trees and do not see the BIG forest. As for the Porche 911...it's a depreciating aseet an pretty worthless overtime whether you payed $50 or $65k is just a matter of when you are ready to feel the exillaration of ACCELERATION! I suugest if it truly you dream I suggest you go do it now....life's too short. In 20 tears everything material/desreable is gonna be up in value except for that used Porche.