Why Deflation Will Be Long Term

Discussion in 'Economics' started by libertad, Dec 23, 2008.

  1. http://seekingalpha.com/article/112024-why-i-see-long-term-deflation


    Several years of raucious and excessive credit availability and its usage marked the high for consumer demand....

    The test of demand finds itself in prices.....

    The question is.....what prices are moving up today ?

    Why will prices move up tomorrow ?

    The depression taught many what living without means....and how important savings really is....

    Waking up having no money and no where to go is a very powerful wake up call......

    Intelligence will begin to mean understanding and living within one's means....the next time around.....

    Many will be educated by the "school of hard knocks"....
     
  2. The heart of the deflation issue is the converse of the housing bubble.

    Incomes for the marginal buyers are too low to afford houses at their present level. Housing prices need to come down to where incomes can afford them.

    The Gummint will try to "inflate like mad" to get wages up... but houses and everything else will go up as fast, so "inflating our way out of it" won't be effective.

    Easy credit, reckless leverage, and lack of oversight got us into this mess. The unwinding will take much longer than people are hoping for...
     
  3. There's no reason why banks can't lend again.

    Do that and deflation ends.

    The problem is banks hoarding. Period.

    Nothing has been done to nullify CDS or TARP mortgages.

    That means the Bankers are in control and raping the US for 7 Trillion over-and-above, whats necessary to end this.
     
  4. Nullify CDS, Tarp mortgages. Bam.

    Problem solved. Crisis over.

    Banks lend again.

    Why hasn't that happened?

    Thats the only question you should ask yourselves.

    Why?

    Because the Government is NOT in control.

    The Bankers are.
     
  5. Gnome....

    Easy credit, reckless leverage, and lack of oversight got us into this mess. The unwinding will take much longer than people are hoping for...

    .....................................................................................................

    And in the meanwhile the gummint side will continue to try to take more from less.....as the government will also be causal in rising prices with few buyers....

    The people that have been put in place are looking to the same old government tools and are just not thinking outside the box at all....

    Obama has demonstrated that he will be working within the old framework...because that is what he knows....

    Structural change that truly provides incentive to capitalism by individual innovation adds to what workers and savers can do....

    Notice the recent "Drive By Socialism by Chavez" ?

    http://www.chicagotribune.com/business/sns-ap-lt-venezuela-chavez-mall,0,4162588.story

    This is a blatant example of government imposition....

    However when the government takes away a worker/savers buying power....how is this any different than Chavez ?
     
  6. The Gummint already confiscated the Social Security Reserve funds (OK, technically they say the only "borrowed" it.... yeah, like it would ever be repaid with anything other than print-money...)

    Tax payers already have a significant amount of their earnings confiscated in the form of taxes.

    Now, the Gummint wants the taxpayer to fund bailouts and to be the one who gets stiffed when the bailouts fail anyway.

    Soon, NObama will be "redistributing" the wealth... that is taking from the haves and giving to the have-nots... another form of property confiscation...

    And then there is always inflation and currency debasement. That's just another form of asset and buying power confiscation by the Gummint.

    Eventually, the Gummint would like all of us to send them everything we have and everything we earn... and then Gummint could just send us an allowance.

    "From each according to his ability, to each according to his need"... Karl Marx

    Soviet Union "played dat"... and it busted 'em. Think it will be any different here?
     
  7. Exactly......

    The bottom line is that when personal income capabilities contract....the size of government has to contract as well....

    The problem is ....government is getting bigger....as individuals are becoming poorer....

    ..............................................................................................

    There is where I differ from the current situation....

    I believe that government could get bigger if individuals got bigger.....

    So what to do....

    Make individuals bigger first.....not make government bigger first....

    Impose a 10% consumption tax only....this will make individuals bigger first....let businesses go at it head to head with innovation and productivity first....

    My bet would be that such a structural change would put the US in surplus....the likes of which it has never seen.....

    It would be at this point that government could do more and take away less prorata....
     
  8. But when do you ever see that?

    Gummint gets bigger year after year. The private sector is shrinking. The ratio of Gummint/Private continues to grow.

    We can't ALL work for the Gummint! They product NOTHING... they just rake off a fat vig for being the middle-man money changer.

    SOMEBODY has to produce for the Gummint to have anything to milk!
     
  9. Exactly.....

    This is like farming.....

    The government must plant the seeds of personal wealth that is linked to innovation and production....

    Or else there will be no harvest....

    This is exactly what happened to Haiti....

    They literally cut down what created the small amount of production that could have happened....

    Now the local hero in Haiti is the one who has the most wives and the biggest music speaker system....

    What is particularly disturbing is that with all of the good creative minds around....

    Nobody get's it who is in a position to do something about it....

    One questions now ....

    How to make "individuals" bigger first......

    Deflation is a result of the lack of demand.....

    It does not matter how much one supplies....if there is no demand for it....ie GM....

    How does one increase demand ?

    Make "individuals" bigger.....

    How does one increase government ?

    Make " individuals" bigger FIRST......

    Obama policies are just the opposite.....Obama has mastered the "two party" system tools.....

    Not good......and I like Obama because he is self made....

    He needs a different set of tools....
     
  10. lrm21

    lrm21

    Deflation is a contraction in the supply of money.

    This period is not deflation but disinflation

    People are liquidating all assets to raise capital

    Prices are not falling across all assets

    Medical care, univerisities, is not getting cheaper nor has gold dropped significantly

    This period of liquidation will last longer than most expect but inflation will come with a vengenance

    In addition the weak situation in the Usa will lead to stagflation as raw materials and basic good prices explode

    Dollar is devalued to deal with crushing debts
    American will have falling wages as unemployment hits 18 24%

    The average American is in for some serious pain
     
    #10     Dec 23, 2008