Price Deflation vs Asset Deflation

Discussion in 'Economics' started by lrm21, Mar 23, 2009.

  1. lrm21


    Good Site which offers a different perspective with good analysis

    Price Deflation/ Inflation and Asset Deflation/Inflation

    and how you can have an economy where Asset prices are deflating while consumer prices inflate.

    A very destructive combo.

    Many think if we get inflation our homes, will shoot up in price, or we will be able to payoff our debts.

    But in reality that will not happen.

    As the effects of inflation and deflation can occur in different areas and will affect different groups. Myths One.htm Myths Two.htm
  2. We are already seeing this to a degree. Food prices, movie tickets, haircuts, health care, etc.. all increasing while stock market, RE, and interest on savings decreasing.
  3. yes in a nutshell....

    first people buy food, then they buy shelter, then they buy desireable things

    if the value of food goes up, then the value of all other things goes down.

    cost push inflation affects consumables mainly
    quantitive inflation affects everything but in a pyramidial heirarchy beginning with assets, and ending with wages, to create an inflationary spiral for a time that must battle itself out, wage earner versus capitalist. (and corrupt government officials)

    demand pull inflation is simply a temporary mode which is eventually offset by the division of labour.

    Ultimately where does the division lie in where the inflation hits most?

    On who wins the showdown of wage earner versus capitalist. Usually the capitalist wins, which is why inflation is perpetuated.

    But everyone, even the capitalist loses in the long run.


    Because the god of economics is efficiency. If inequality or equality is forced beyond natural equilibrium, then even the initial gainers will lose out in the long run (unless they are wise and cut and run before a revolt or crisis)