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Today's economy is pretty grim. Now, maybe people will learn not to try to live over there heads financially, maybe people will begin saving more, maybe lenders will be more selective who they lend to, maybe lending standards will be improved, maybe the latest "must have" electronic gadgets will be evaluated more closely before they are actually purchased, maybe people will now realize that stock and financial markets do not automatically go up every year, maybe cheaper pastimes (like chess) will become more popular, maybe people will take steps to better simplify and organize there lives, maybe people will now realize using what they have to it's maximum potential is better than simply aquiring more posessions. Perhaps some good will come from this...😏
Originally posted by KazetNagorraI can't see how that can be. I distinctly remember Margret Thatcher, in 1982, saying that - with the implementation of monetarism - the time of Boom & Bust was over.
If there's one thing you can learn from history, it's that people don't learn from history. In five years the economy will probably be booming again and people will have forgotten their mistakes in the past.
People will save more if there is deflation because money increases in value. People save less when there is inflation because money loses value with time. 0% inflation (no inflation) or mild deflation is ideal.
Controlling boom and bust cycles was the reason given for the creation of the Federal Reserve System. When Ron Paul was questioning Ben Bernanke, Bernanke said that the role of monetary policy is not to prevent boom and bust cycles. That is why the Fed Reserve was created but it is clear why he says that. Boom and bust cycles have gotten worse since the creation of the Fed reserve.
Someone should ask him what his job is. I would like to know.
Originally posted by bill718Can you explain how the policies of the current congress and administration are going to help people learn any of these lessons?
Today's economy is pretty grim. Now, maybe people will learn not to try to live over there heads financially, maybe people will begin saving more, maybe lenders will be more selective who they lend to, maybe lending standards will be improved, maybe the latest "must have" electronic gadgets will be evaluated more closely before they are actually purchased, m ...[text shortened]... l is better than simply aquiring more posessions. Perhaps some good will come from this...😏
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Originally posted by Metal BrainWhy is mild deflation ideal? I would say mild inflation (0-1% ) is better, the Japanese have had their economy deadlocked due to deflation.
People will save more if there is deflation because money increases in value. People save less when there is inflation because money loses value with time. 0% inflation (no inflation) or mild deflation is ideal.
Controlling boom and bust cycles was the reason given for the creation of the Federal Reserve System. When Ron Paul was questioning Ben Bern ...[text shortened]... he creation of the Fed reserve.
Someone should ask him what his job is. I would like to know.
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Originally posted by FMFNo doubt every politician that get's their hands on the levers say that their own recipe is going to end boom and busts.
I can't see how that can be. I distinctly remember Margret Thatcher, in 1982, saying that - with the implementation of monetarism - the time of Boom & Bust was over.
Yep, you're right Metalbrain, why bother saving when inflation aka money over supply aka stealth tax whittles your savings as fast as you try to build them.
The ideal would be neither inflation or deflation, for that to happen money needs to be based on something concrete, how would it be to have a currency based on energy?
Originally posted by KazetNagorraNotice I used the word "mild".
Why is mild deflation ideal? I would say mild inflation (0-1% ) is better, the Japanese have had their economy deadlocked due to deflation.
Yes, deflation can be horrible if it gets out of control. People will hoard money (because it is increasing in value) and the economy will freeze up. That is what happens when people do not spend money.
0% to 1% deflation would be ideal. I know some people say mild inflation is healthy for the economy but that is just propaganda. Inflation is a tax. Of course your government wants you to think their monetary tax is good for you. Just because their tax is mild does not make it good for you.
Here is an article by Ron Paul you will find revealing. it will give you a better understanding of what I am talking about. It explains the monetary factor involved in oil and war. I highly recommend it.
http://www.house.gov/paul/congrec/congrec2006/cr021506.htm
I challenge the notion that mild deflation is bad. Deflation happens all the time. Computers are cheaper than they were 10 years ago. That means computer prices are deflating. Is that bad? It is certainly good for the consumer. Is anybody complaining?
Without a reduction in prices the only way to increase your standard of living is to earn more (adjusted for inflation) than you used to.
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Originally posted by KazetNagorraActually, the Japanese economy has suffered because its industries have cut worker pay in order to compete with lower priced rivals in other countries. This caused consumer spending to collapse:
Why is mild deflation ideal? I would say mild inflation (0-1% ) is better, the Japanese have had their economy deadlocked due to deflation.
Japan eventually pulled itself out of the Lost Decade of the 1990s, thanks in part to a boom in exports to the United States and China. But even as the economy expanded, shell-shocked consumers refused to spend. Between 2001 and 2007, per-capita consumer spending rose only 0.2 percent.
Now, as exports dry up amid a worldwide collapse in demand, Japan’s economy is in free-fall because it cannot rely on domestic consumption to pick up the slack.
In the last three months of 2008, Japan’s economy shrank at an annualized rate of 12.7 percent, the sharpest decline since the oil shocks of the 1970s.
“Japan is so dependent on exports that when overseas markets slow down, Japan’s economy teeters on collapse,” said Hideo Kumano, an economist at the Dai-ichi Life Research Institute. “On the surface, Japan looked like it had recovered from its Lost Decade of the 1990s. But Japan in fact entered a second Lost Decade — that of lost consumption.”
The Japanese have had some good reasons to scale back spending.
Perhaps most important, the average worker’s paycheck has shrunk in recent years, even after companies rebounded and bolstered their profits.
That discrepancy is the result of aggressive cost-cutting on the part of Japanese exporters like Toyota and Sony. They, like American companies now, have sought to fend off cutthroat competition from companies in emerging economies like South Korea and Taiwan, where labor costs are low.
To better compete, companies slashed jobs and wages, replacing much of their work force with temporary workers who had no job security and fewer benefits. Nontraditional workers now make up more than a third of Japan’s labor force.
Younger people are feeling the brunt of that shift. Some 48 percent of workers age 24 or younger are temps. These workers, who came of age during a tough job market, tend to shun conspicuous consumption.
http://www.nytimes.com/2009/02/22/business/worldbusiness/22japan.html?_r=2 (registration required)
This is what can happen when a developed nation relies on "free trade" in commodities that can be produced in developing nations. Of course, "protectionism" that might help domestic workers is absolutely forbidden by the neoclassical geniuses.
Originally posted by no1marauderThis is just a natural process that is better to happen sooner than to try and stave it off with artificial price controls until later.
This is what can happen when a developed nation relies on "free trade" in commodities that can be produced in developing nations. Of course, "protectionism" that might help domestic workers is absolutely forbidden by the neoclassical geniuses.
Why do you think this arbitrary line around a piece of dirt should stop goods crossing it, or that people should be fined for bringing goods across it?
Originally posted by WajomaI realize that you are unable to grasp this concept, but the purpose of a society is to better the lives of its members. Allowing the economic lives of your workers to be destroyed simply because the wealthy and middle classes can save a couple of shekels on various items is hardly in line with that purpose. As I said before, you and your ideological brethren seem obsessed with forcing down the incomes of the average worker in the world to the lowest common denominator purely for the benefit of the elites. The article points out that this has led to disaster in Japan and the same dynamic is at work here in the US and is having similar results.
This is just a natural process that is better to happen sooner than to try and stave it off with artificial price controls until later.
Why do you think this arbitrary line around a piece of dirt should stop goods crossing it, or that people should be fined for bringing goods across it?
No economic system or strategy is "natural"; all are artificial and man made. When a system or strategy is leading to economic hardship for large numbers of your people, a wise society jettisons it.
Originally posted by Metal BrainVery interesting article, I had heard about the link between Iraq and the euro, but this puts things in context. I don't see how it argues for deflation, however, though it successfully argues that high inflation due to printing money is bad, but that's obvious.
Notice I used the word "mild".
Yes, deflation can be horrible if it gets out of control. People will hoard money (because it is increasing in value) and the economy will freeze up. That is what happens when people do not spend money.
0% to 1% deflation would be ideal. I know some people say mild inflation is healthy for the economy but that is jus ...[text shortened]... to increase your standard of living is to earn more (adjusted for inflation) than you used to.
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Originally posted by KazetNagorraGood point, I think you're right, or at least about economical history.
If there's one thing you can learn from history, it's that people don't learn from history. In five years the economy will probably be booming again and people will have forgotten their mistakes in the past.
Originally posted by KazetNagorraNo, it doesn't make the case for mild deflation. I just wanted to show inflation is a tax.
Very interesting article, I had heard about the link between Iraq and the euro, but this puts things in context. I don't see how it argues for deflation, however, though it successfully argues that high inflation due to printing money is bad, but that's obvious.
High inflation, low inflation, it is all a tax. It is just a matter of how much people are being taxed. Because the US dollar is world reserve currency the US can tax beyond it's own population. That is why it is so important to the USA that all transactions for oil are done in US dollars, so the dollar remains the world reserve currency. I don't think that is the only motivation to go to war with Iraq though. There are other factors.
I think of deflation as potential wealth. I know deflation has it's dark side if it gets out of hand, but lower prices raise the standard of living if deflation rate is kept low. Increased productivity should lead to lower prices (deflation) but the money supply is always raised to tax it away before we ever see it.
Mild deflation is healthy and shows responsible monetary policy. We are being cheated out of lower prices that should come from higher productivity. People don't realize they are missing wealth they never see.