why fighting deflation is a waste of money

Discussion in 'Economics' started by zdreg, Feb 1, 2011.

fighting deflation by priniting money will lead to economic disaster for the US

  1. True

    11 vote(s)
    55.0%
  2. False

    8 vote(s)
    40.0%
  3. doesn't change the outlook

    1 vote(s)
    5.0%
  1. Who authored this article? What is the source? Why is there no link?
     
    #11     Feb 1, 2011
  2. When I read this, it reinforces my belief that deflation really is terrible. The article goes on to state that the deflation is bad conclusion is erroneous, but I disagree.

    As far as I can tell, a major theme for Japanese citizens seems to be "I've learned to live with it." Is that a desired outcome for the rest of the world?
     
    #12     Feb 1, 2011
  3. zdreg

    zdreg

    #13     Feb 1, 2011
  4. I actually have all sorts of issues with Williams and ShadowStats.

    However, the main question is why should he be trusted more than the BLS? It's not like he's totally impartial and has nothing to gain from spreading his version of the number(s).
     
    #14     Feb 1, 2011
  5. jjf

    jjf

    Good point.
    But equally qualified is the notion that we should calculate inflation under the old standard to make a comparison.

    What has changed in the world that requires a new method of calculation anyway.

    We produce and export and we consume and import.
    We have inflation/ deflation and we have price fluctuations.
    And then we have meddling.
     
    #15     Feb 1, 2011
  6. Bernanke would never let deflation happen beyond what is required to keep defaults and bankruptcies in control (i.e via low rates)

    The shadow banking system would collapse with sustained periods of deflation....

    Time to manipulate the yield curve...
     
    #16     Feb 1, 2011
  7. OKI, I agree with you that, ideally, we'd like consistency.

    However, if we take this consistency to the limit, eventually your basket gets woefully outdated. Let's take an extreme example. One of the earliest inflation-linked bonds, the Massachussetts Depreciation Note issued to Revolutionary soldiers in 1780 in lieu of wages, was linked to the following:
    Five Bushels of Corn, Sixty-Eight Pounds and four-seventh Parts of a Pound of Beef, Ten Pounds of Sheeps Wool, and Sixteen Pounds of Sole Leather
    Personally, I don't think I'd want any of my contracts today linked to that, 'cause I don't consume any of those things.

    My point is that consistency eventually leads you into a dead end, where you potentially have to change the entire basket all in one go. Given that this is undesirable, the gradual substitution that's practiced, not just by the BLS, but worldwide, is actually a better alternative, IMHO. You can say the same about the hedonic adjustments, but things get a bit murkier there.
     
    #17     Feb 1, 2011
  8. olias

    olias

    I agree with you, but at least this was an interesting article. It presented a better argument than the usual 'deflation would be good because I could buy my TV cheaper' rationale.
     
    #18     Feb 1, 2011
  9. Common courtesy would suggest you post a link, considering you are already at said website. Why should I have to waste my time looking up references for an anonymous article you posted? That is the job of the OP, if the OP wants to be taken seriously and with credibility that is....
     
    #19     Feb 1, 2011
  10. Granted.

    The most frustrating part about debating someone who is pro-deflation is the fact that they tend to not look at the big picture. As you said, they think it means cheaper food and big screen TVs.
     
    #20     Feb 1, 2011