Are we going to get inflation after the deflationary period? Obviously, that is like asking if it is going to get warmer after it gets cooler. Boom, bust, boom, bust and so on. High inflation on the other hand? There are many more factors then just deficits to consider. Bernanke doesn't know the answer to anything. I can tell you one hundred things he predicted and got everyone wrong by a mile. By speculating inflation around the corner he is trying to encourage capital investment in the present. Just propaganda. The question is. How long is the deflationary period going to last, before it returns to inflationary. That time period is far more important than considering how extreme the inflationary period will be.
I am not into all the conspiracy theories but retain an open mind. Honestly I am continually torn between these two ideas: 1/ The government is completely incompetent - true OR/PLUS 2/ Someone with the power to do so is trying to destroy upper class and middle class, and create one class of worker bees. Why I consider number 2, is I just cannot comprehend the continued stupidity. It is even too incompetent to call it incompetence. It is like they are trying to mess it all up haha. But then I go back to number 1. Because I just cannot really see a great purpose for creating a uniform class. But then again I cannot understand how they could be so dumb? Either way, it just makes me want to go live in some remote village somewhere and ignore it all.
If you dont see high price inflation in US in three years it will be because piles of $100 dollar bills will be blocking your view
Deswamped, there is a lot of interesting statement in your post. I agree on most, but: I, too, use labour as the costant to which refer (define) other economic values (including money value), but the output of labour is not costant. We have a better standard of living (speaking of goods only) than a hunter-gather because the output of one hour of labour is higher in our society than in that. Technology (including organizational technology, like labour division and specialization) is the difference. I often say that the only difference in human advancement is knowledge, and more than that, knowledge spreading. I agree that the amount of money does not matter, but its variation (derivative) seems to me very important, because we have a lot of accumulation in the system (savings, stocks, amortization, debts, etc.) in money, and all counts are made using currency. So dinamics, variation in time of money real value, in my opinion matters. Moreover, value of money is a convention, and understanding of is change is different between people, adding another (uncontrollable?) variable to the system (mess?). Even if it is probably a zero sum game (someone lose what someone else is gaining, no free lunch anywhere) seems to me important if who lose is a wrongdoers or not. You may thought a scenario where wrongdoers gain from responsibles, where parasites (anyone whose labour do not add nothing to total wealth) gain from productive labour (like in this crisis? like in past years bubbles?) and the amount of this wealth transfer seems to me very important to understand people reactions in long run. What do you think? Another view: people have used their FUTURE earnings. Labour is the costant, right? If I spend now my labour of tomorrow, I have to spend less labour tomorrow, right? (My labour is a finite value, my life is limited). But if what I spend today (borrowing) make innovation, ie more productivity for my future work, I could have gained from borrowing (the more the earlier I borrow, because my productive life is limited by nature). At the same time, if that productivity improvement is due to someone else, does not matter, if it is shared, even only partially (my work is gaining value, too). So borrowing is a bet, a bet on innovation, a bet on productivity improvements in time. If all borrowers use that anticipation of their future gains to consume (goods and services for their living, not for investing, ie not for productivity enhancement) there will be no productivity gain, and somewhere in future they will be forced to consume less. If the system overreact to less consumption (lay-offs) the vicious circle can begin. Moreover, bubbles (as real estate bubble, here like in US) are only a way to subtract labour from someone to someone else. Zero sum game, if it wasn't a way to subtract from productive to (often but not always) parasites (one could be a productive person AND a parasite depending if that part of his labour create something useful (add to total wealth) or not). The second important variable is, IMO, employment rate. The less it is, the less output you have. Less output means less wealth to divide (whatever division rule you use between people). I cannot prove it -maybe I'm not ready for a Nobel prize -but I strongly feel that like maximum energy transfer between two connected lines is when their impedance is equal both sides, the maximum output of the system is when all labour has the same value (taking in account the whole life, so time needed for gaining ability to that work and different productivity due to personal skill and talent). If not, someone would switch to a higher value job, stabilizing the system. Again derivative seems important here, as information and time needed to switch. Think of Western countries. They outsource labour (less internal employment, so less output) and import goods (labour). What they give in return? Technology, for a while, then? Piece of papers? For how much time? All is derivative here: improvement of productivity of third world countries due to our technologies is so much that people accept to lose a lot of them (work for less) and then destabilize their peer here. But when (not if!) they will understand, what happens? This help to understand "intellectual property" war, isn't it? Seems to me like enclosures in XVI century. What do you think?
I think I understand fiat currency. Let me see..........the fed has more than doubled its balanced sheet.......wont that be inflationary.
homosalmon first of all - fuck fuck fuck I somehow pressed the back button and lost everything I wrote....so I am going to be far more lazier on this one thanks for your points "but the output of labour is not costant." constant enough over one, two, three or so trade cycles to be neglible enough to not be a concern "I agree that the amount of money does not matter, but its variation (derivative) seems to me very important. Moreover, value of money is a convention" it either matters or is doesnt, no exceptions. Deriviatives blah blah are just another echelon of efficiency. And the rule goes, with more effiency and specialisation we get higher highs and lower lows as far as overtrading and undertrading are concerned. Nothing to do with inflation or deflation. At the end of the day it is all just capital whatever fancy name you give it. However, you pinpoint an important concept. Money has a phsychological influence due to its symbolism. People relate to numbers. Karl Marx covered this well. But this just goes to show that everything is quite pshychological and not so reliant on quantity of money, but the runaway bull or encroaching bear that is more due to overtrading and undertrading. But even this pshyc anomalies are righted by real value eventually. "Even if it is probably a zero sum game (someone lose what someone else is gaining, no free lunch anywhere) seems to me important if who lose is a wrongdoers or not. You may thought a scenario where wrongdoers gain from responsibles, where parasites (anyone whose labour do not add nothing to total wealth) gain from productive labour (like in this crisis? like in past years bubbles?) and the amount of this wealth transfer seems to me very important to understand people reactions in long run." yes yes, life is not fair. Because human beings are not fair on an individual level. Inflation does cause inequalities per distribution sequence, and no doubt the capitalists and government are quite in league with that... but then just imagine how much they are losing now from this deflation? It goes both ways, but its taken a damn long time to finally come. If you had saved money you could be getting some bargains and buying off some ex-wall street magnate. Nothing is ever perfectly fair. People want as much as they can get for themselves, and our economy represents that in all facets. and yes yes, inflation and deflation screw around with peoples financial planning and steal from people savings if they are not knowledgable in liquidating and investing at the right times, but hey they are free to learn, and we are free to vote. Problem is people are just plain dumbasses. Dumbasses will always be taken advantage of whether you like it or not. " Another view: people have used their FUTURE earnings. Labour is the costant, right? If I spend now my labour of tomorrow, I have to spend less labour tomorrow, right? (My labour is a finite value, my life is limited). But if what I spend today (borrowing) make innovation, ie more productivity for my future work, I could have gained from borrowing (the more the earlier I borrow, because my productive life is limited by nature). At the same time, if that productivity improvement is due to someone else, does not matter, if it is shared, even only partially (my work is gaining value, too). So borrowing is a bet, a bet on innovation, a bet on productivity improvements in time. If all borrowers use that anticipation of their future gains to consume (goods and services for their living, not for investing, ie not for productivity enhancement) there will be no productivity gain, and somewhere in future they will be forced to consume less. If the system overreact to less consumption (lay-offs) the vicious circle can begin. Moreover, bubbles (as real estate bubble, here like in US) are only a way to subtract labour from someone to someone else. Zero sum game, if it wasn't a way to subtract from productive to (often but not always) parasites (one could be a productive person AND a parasite depending if that part of his labour create something useful (add to total wealth) or not). The second important variable is, IMO, employment rate. The less it is, the less output you have. Less output means less wealth to divide (whatever division rule you use between people). I cannot prove it -maybe I'm not ready for a Nobel prize -but I strongly feel that like maximum energy transfer between two connected lines is when their impedance is equal both sides, the maximum output of the system is when all labour has the same value (taking in account the whole life, so time needed for gaining ability to that work and different productivity due to personal skill and talent). If not, someone would switch to a higher value job, stabilizing the system. Again derivative seems important here, as information and time needed to switch. Think of Western countries. They outsource labour (less internal employment, so less output) and import goods (labour). What they give in return? Technology, for a while, then? Piece of papers? For how much time? All is derivative here: improvement of productivity of third world countries due to our technologies is so much that people accept to lose a lot of them (work for less) and then destabilize their peer here. But when (not if!) they will understand, what happens? This help to understand "intellectual property" war, isn't it? Seems to me like enclosures in XVI century." gawd...that was quite a rant... lines....energy transfer...what the?? hehe yes everything you said sounds right... ummm.. importing from china is a good thing. It is cheap. basically if everything is free to run its own course as per allowing people to work in their most beneficial role, then that is the best possible outcome economically. As for whether one country performs better than another, that is quite simply up to each individual. There are alot of lazy and expect everything to be done for them, take no responsbility type people in america. Then there are exceptions of course. That is a cultural thing. What we are seeeing is a new move into the age of aquarius. a new way. an empire withers, a new one is created from the ashes.
May I add a number 3? /OR/PLUS 3/ The system is designed (grown?) in such a way that people who make decisions that affect the system behaviour have no incentive to make unadvantageous decisions (for them) even when system is headed to (or on) self-destruction mode, because that decisions surely affect their career (probability=1, time=now), while system destruction is a a possibility (probability<=1) and time is deffered (maybe next year, maybe after retirement, maybe after death?). Like children when they try to postpone their punishment?