My point is the Fed and everybody else seems to look at the headline to determine whether there is deflation. But when it comes to determining if we have an appropriate level of inflation, then you are told you have to look at the CORE rate , because food and energy are volatile. Isn't that a double standard ? A cursory look at the core rate #'s this year, in the US at least, tells me there was never deflation on a yoy basis and thus we had negative real interest rates . So what is the justification behind all this talk of "deflation is here "? there may have been a threat of deflation but we never really had it in 2009. If I am right about the core rate that stayed positive , it's quite surprising that nobody talks about this , not even Santelli on CNBC !
You could be right about core inflation, I haven't looked at the numbers closely. On a side note, I've always thought that food and energy SHOULD be included in deflation/inflation talk because although volatile, do significantly effect prices throughout the economy. Sure, if oil spikes in a particular month inflation will also spike. But that is real. It costs more for consumers at the pump, company's to ship product, etc. etc.
wrong again - so you say people will avoid buying a car for 10K because next year it will cost 9.9K? if I need a car now - I will go and buy it. deflation doesn't apply here - especially if deflation like 1-2% if I need a house and it's a good deal - for example I save 2K on rent per year and it costs 100K will I wait to buy a house for 99K in a year? if someone needs cancer drug and die in 6 months will he wait to buy it cheaper in a year? Al economic laws that apply to electronics all apply to anything else -cars, houses etc. Deflation would encourage innovation and increased productivity It can't be bad In 19 century US was in deflation for tens of years and nothing bad happened I don't really see any downward spiral here. The only downward spiral is for debtors who are addicted to cheap credit
And since global banks and countries are the biggest debtors.... They will make sure no serious deflation will take hold. Because it would kill them.
So true. In the long run, inflation always wins out. Think back to what the price of a car or a house was 20-30 years ago
You would get royally fucked in a deflationary environment, I am sure of it. It's not necessarily the PRICE ALONE that causes consumers to delay purchases (although it is a major contributer). Good luck paying off that $300K mortgage you just took out when you are now making x% less wages and your house is now valued at x% lower than when you purchased it...Effectively most if not all mortgages turn upside down... That $25K loan you just took out on your car? Oops...it's going to take you x amount of time longer to pay that off. You think we had a credit freeze last fall? Imagine a deflationary spiral... Think of the big picture.
LETS STOP GUYS lets begin by defining inflation and deflation. I think we know different in these two terminologies.