Deflation would be a good thing for some (i.e., people who are responsible with their money) and bad for others (i.e., people who are overleveraged). However, whether you think deflation is bad or not doesn't matter because we don't have deflation.
That's why 4 x tomatoes cost me $5 bucks right? Fuck that bald head mother fucker. Someone shoot put a bullet in his head already.
I understand what you are saying - certainly the government spends more than it takes in. But the Fed is the one whose mandate is to apparently pick a mystical interest rate that will create "just the right amount" of inflation. Having 0% interest rates when there is already rampant inflation is just stoking the fire.
The effects of deflation are: Decreasing nominal prices for goods and services Increasing real value of cash money and all monetary items Discourages bank savings and decreases investment Enriches creditors at the expenses of debtors Benefits fixed-income earners Recessions and unemployment Deflation is generally regarded negatively, as it causes a transfer of wealth from borrowers and holders of illiquid assets, to the benefit of savers and of holders of liquid assets and currency. In this sense it is the opposite of inflation, which is similar to taxing currency holders and lenders (savers) and using the proceeds to subsidize borrowers. Thus inflation may encourage short term consumption. In modern economies, deflation is usually caused by a drop in aggregate demand, and is associated with recession and (more rarely) long term economic depressions. While an increase in the purchasing power of one's money sounds beneficial, it amplifies the sting of debt. This is because after some period of significant deflation, the payments one is making in the service of a debt represent a larger amount of purchasing power than they did when the debt was first incurred. Consequently, deflation can be thought of as a phantom amplification of a loan's interest rate. If, as during the Great Depression in the United States, deflation averages 10% per year, even a 0% loan is unattractive as it must be repaid with money worth 10% more each year. Under normal conditions, the Fed and most other central banks implement policy by setting a target for a short-term interest rate â the overnight federal funds rate in the US â and enforcing that target by buying and selling securities in open capital markets. When the short-term interest rate hits zero, the central bank can no longer ease policy by lowering its usual interest-rate target.
A deflationary spiral is a situation where decreases in price lead to lower production, which in turn leads to lower wages and demand, which leads to further decreases in price.[9] Since reductions in general price level are called deflation, a deflationary spiral is when reductions in price lead to a vicious circle, where a problem exacerbates its own cause. The Great Depression was regarded by some as a deflationary spiral
So a reversion to the mean that brings about some much needed adjustments to the "bubble pricing" we've seen in tuition costs, home prices, food prices, health insurance premiums after near parabolic increases during the previous Fed experiments is the "enemy" according to this line of logic? No, instead we should create a bifurcated centrally planned economy whereby the working stiffs carry the load and pay the price for continued, manipulative tinkering to create constant rising prices, even while the real economy is sucking wind. This is the madness that we've been conditioned to accept.
Quite shocking that you are blaming the spending habits of your politicians on the Fed. Think about it - the USA debt issues started way before 2007...
Exactly, but you see these devious bastards will tinker with the formula to create the outputs that fit their centrally planned targets. So now the fact that a house is trading 30% off of its bubble highs, yet still 200-300% above its mid-late 1990s prices is considered "gravely deflationary" and merits a full on press of quant easing and record low mortgage rates because, you see, those bubble prices need to be reached again NO MATTER THE COSTS to the real economy. We'll strip out every other essential from the equation because health insurance premiums, gasoline prices, tuition costs, food prices, assorted auto and home insurance policies don't count.