Why Deflation Will Be Long Term

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

  1. gnome

    gnome

    I'm curious about how much the demand for cars in general will decline as the morass deepens and unemployment increases.

    Even when we do come out of this (and that's likely to be much later than most are currently hoping), there will be a new "financial conservatism"... some by lenders requiring borrowers to be more substantial and to make down payments... others by consumers wanting to cut back and build some savings for the next potential lay-off period.

    New car demand might drop what... 15-20%? What's the UAW going to do then? Ask for more money so they can keep paying benefits and high salaries while making more cars than can be sold?
     
    #11     Dec 23, 2008
  2. Irm21

    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



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

    Exactly why government should be pulling out all the stops to make "individuals bigger first"....

    No plant ....no fruit....

    You have described exactly what is happening.....

    The government gets bigger by monetization....thinking that this is a remedy....

    When it only make s things worse......

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

    One more time......

    10% consumption tax only is a "real" solution.....This will make
    individuals bigger.....


    This will help make "individuals bigger FIRST"....

    The government cannot collect fruit from a sick plant.....


    The cart is before the horse......with no change in sight....
     
    #12     Dec 23, 2008
  3. Gnome

    I'm curious about how much the demand for cars in general will decline as the morass deepens and unemployment increases.

    Even when we do come out of this (and that's likely to be much later than most are currently hoping), there will be a new "financial conservatism"... some by lenders requiring borrowers to be more substantial and to make down payments... others by consumers wanting to cut back and build some savings for the next potential lay-off period.

    New car demand might drop what... 15-20%? What's the UAW going to do then? Ask for more money so they can keep paying benefits and high salaries while making more cars than can be sold?

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

    Would it be cheaper for the government just to give every citizen a new GM vehicle ?
     
    #13     Dec 23, 2008
  4. gnome

    gnome

    Maybe. They'll probably try it. :D

    Of course, that would kill all the other car makers in the US... who'd pay for a rice burner when the Aztek is free?

    Socializing one thing, then another is a form of economic cancer. No place for it to stop until it at least cripples the victim

    We had a capitalistic system at one time... sort of went along with the founding principles of the USA... "Life, Liberty, Pursuit of Happiness".... anybody recall ever hearing about it??
     
    #14     Dec 23, 2008
  5. At least the taxpayers would get something back that is "tangible".....

    ie Pay $15,000 in tax ....

    and get a FREE GM.....
     
    #15     Dec 23, 2008
  6.  
    #16     Dec 23, 2008

  7. Why? asset prices are moving down.

    regards
    f9
     
    #17     Dec 23, 2008
  8. gnome

    gnome

    Correctamundo! In fact, over the last year there has been a bull market in "cash"...
     
    #18     Dec 23, 2008
  9. dont

    dont

    Why?

    Because the banks are insolvent. Those bad loans are not going to be paid back!

    This is not a crises of liquidity its a crisis of solvency.
     
    #19     Dec 23, 2008
  10. gnome

    gnome

    Likely correct.

    They don't use the word "insolvent", because we know what that means and implies.

    But if it's just a "liquidity problem", we're not exactly sure what that means nor how bad it is... and we presume we can fix "liquidity".

    Fact is, lots of banks either directly or indirectly have TONS of CDSs [worthless?] on their balance sheets.
     
    #20     Dec 23, 2008