[quote=briansd1]CA renter, deflation affects wages as well.
Greece and Spain are prime examples of deflation. That’s their only way out because they can’t print money.
You might feel a little more secure because your family’s income is based on government union contracts which are hard to overturn, but deflation would affect all wage earners.
The truth is that there’s a glut of capacity out there; so there is hardly any inflation.
I content that the food inflation we have seen is due mostly to bad weather and would have occurred anyway.
It’s true that central bank liquidity benefits the top earners more. But it’s better than nothing since the liquidity loss due to credit contraction must somehow be replaced to stabilize the economy.
Since there’s no appetite for fiscal stimulus, monetary policy is the only other tool.[/quote]
What’s going on in Greece and Spain are not examples of deflation as much as they’re examples of too much inflation — too much debt!!!! If they repudiate their debt and let asset prices fall, they will be able to turn their economy around.
The problem is that labor and capital are at odds. Who is going to bear the losses: the banks/lenders who would lose if the Greeks/Spaniards repudiate their debt, OR the workers/govt who owe that debt, and will be burdened with it for as long as they agree to pay it back? If they agree to pay off their debts, they will suffer greatly for many, many years. If they repudiate their debt, they will go through a period of economic pain, but will be able to heal much more quickly. The lenders will take a hit, but that won’t be the end of the world. Many countries (and companies, and individuals) have repudiated their debts, and they’ve been much healthier for it.
Inflation doesn’t work unless the additional money ends up in the hands of the debtors. So far, we haven’t had that (not much, at least). If they continue to inflate as they’ve been doing, it will make our situation far, far worse than it already is. They have managed to prolong the recession/depression and have made our debts even more unbearable.
You keep thinking they’ve “fixed” things by inflation. The debt downgrade and skyrocketing debt levels are proof that they have made it worse. It is worse today than it was in 2008 because of all of your beloved manipulations.
