[quote=briansd1][quote=Arraya]
I am still in the deflation camp. IMO, All Bernanke has done is facilitate a wealth transfer and protected the banks – while delaying the inevitable. Deflation is still going to reign down like a monsoon on the populace.
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I think that the Federal Reserve has more firepower.
If we have deflation, the Fed can print money until we have inflation. In the face of central bank printing, what would obviate intervention and cause deflation instead?
Japan experienced deflation because their prices were so expensive relative to the rest of the world. That’s not the case with American, but perhaps for wages and health care.
I’m not worried about runaway inflation either because, in an uncertain world, America is still a safe haven.
Also, because of high unemployment and globalization, workers can’t demand pay raises. That leaves room for the Fed to implement QE3.
As you mentioned in your other thread, $4.5 trillion of equity was wiped-out. Sure, the market will bounce back, that that’s still a real loss of wealth. More liquidity on the part of the Fed can only help. IMO, fiscal stimulus would be better, but monetary intervention is better than nothing.[/quote]
Again, the beneficiaries of Bernanke’s inflation are NOT the debtors who need the money to pay off their debts. The inflation is going to the top — to asset holders/creditors who have plenty of money — where it’s resulted in massive speculation that has driven up the prices of goods that are needed by those who owe the debt. It has made it **more difficult** for debtors to pay off their debts, not easier, because they have less discretionary and less powerful income. Their money is earned in **dollars** and those dollars are buying less and less for the workers in this country.
In order for inflation to work the way you want it to, it has to be directed at the bottom — to the debtors — with no additional debt offset. That’s not happening now.
You’ve said it in your post — wages will not go up for as long as we allow U.S. employers to hire cheap labor in Third World countries. That means that PRICES go up, which does NOT make it easier to pay off debt.
