If you raise interest rates to stop inflation, then you must lower them to stop deflation. What happens when your interest rate is zero? Do you then give loans and only have to pay back 90% of it? Would that stop deflation?
Deflation (nor inflation, for that matter) wouldn't be a concern except for deficit-spending Gummint and print-money Fed. In spite of the pain, deflation is good for the economy and country overall.... weeds-out excesses... In spite of Bernanke's assertion of "dropping money from helicopters to ward-off deflation" is the cure, it may not be... we might have to endure the "Big D" in spite of the little squirrel's bumbling.
low rates and money pump stop it in a textbook sense. Unfortunately, the rates and money pump are not going into consumer hands, and that will not stop it. Consumers have to receive the dollars to stop it.a 30% principle haircut off of all motgages would be a good step.
Really? That would have cost 3 trillion dollars, and stopped the housing value destruction. We have already spent in excess of this AND will spend more. Guess what, none of it is going to help the consumers out either. We are a consumer driven economy, therefor putting money into CONSUMER hands is a real solution for starters. Instead we are buying the bad debt which mostly is mortgage related, and the values are still falling and will continue. People personal wealth have been destroyed, stocks, bonds and real estate. There will be no consumer spending for a long time to come now, the wealth effect loss will guarantee this. If your going to be socialist (we are), you need to fix the root problem. What is your solution?
what almost everyone forgets, is that this was the question of 2002 greenspan created a housing bubble in response to it... now what? the big picture question is this: how do you make a long term sustainable economy, where you ship all manufacturing overseas, and outsource services, and nurse the economy along with deficit spending and consumer credit? the answer is very simple 'you cant' flawed economic models do what they are designed to do they fail
Deflation is a normal consequence of inflationary-booms. There is nothing wrong with it. Look at prices. Are they are 1980's levels? or 70's? Or even 90's?? FUCK No. They're at pre-2003 levels. Whoop-dee-doo. Problem is - all the Boom-time excess producers and investors get hung out to dry. They bought in at bubble top and prices that return to mean, put them out of business. Everything thats happening is normal and does not spell death to the economy. Deflation is villified in media to promote reckless money printing, largely to save banks. Deflation this, deflation that. Its all bullshit. Let the Banks hold on to their over-priced assets that aren't earning shit. Let them fail. Let Real Estate fail. Everything will go back down to 2000 or 1995-level prices. Its not a big deal. Economy will then recover. Its all Hype.
Thats it. People have no discernment, these days. Its all about the Banks. Thats it. The idiots on CNBC talk-up minutia deflation as the harbinger of destruction. We're told, any deflation leads to the much-feared "deflationary trap" where everyone hoards cash so they can earn a pissy 3% YOY appreciation! BULLSHIT. 5-10% inflation or deflation does not lead to hyperinflation or the deflationary trap. Economies have to get in massive excesses - big double digits - before any of that is even on the radar. People don't understand that economies are self-righting. Booms beget busts. Whether induced by the Central Bank or created through inflationary reduction of discretionary income and price increases. It doesn't matter. Equilibrium always comes. This talk of spiraling delation is pure nonense. Its all a return to mean. I bet if CPI stats were pulled from pre1990 Japan, we'd see prices over the past 2 decades return to those levels in the "uncontrolled" deflation that "ravaged" Japan. Its bullshit. And yea, it hurts consumers who get fucked with big debt and stagnating wages. BUT THATS THE PROBLEM WITH CHEAP MONEY - IT CREATES BUBBLES THAT BURST, YOU IDIOTS. Man oh Man. Gotta love those Fed Cheerleaders A bunch of fucking Morons. They create the problem than marvel at their own genuis for bandaid solutions that rarely provide even a temporary fix. Oh yea, you're real smart. They can't even see what the fuck they're doing.