[quote=CA renter]
To be sure, deflation would wipe out a lot of inflation-induced “wealth,” but is that the end of the world?
I would like to see the govt make direct loans during the deflationary period, and agreed with their moves to backstop higher FDIC limits on deposits, etc. Govt work programs would also be useful during the deflationary period.
IMHO, deflation can be painful, but quick (as long as there is no/little intervention), and the process of healing can beging quickly. Again, things would not go to zero, and people would not stop buying necessities just because the price of stocks or houses is going down. There are plenty of people who would love to jump in at lower prices, which would form a *natural* bottom, as opposed to this tenuous, artificial “bottom” the govt is trying to form.
We need to hit the reset button every once in awhile in order to maintain a healthy economy. It keeps things in check, too (fewer bubbles and misallocation of capital), as people won’t expect the govt to bail them out of their foolish “investments” every time they make a mistake.[/quote]
Define end of the world;)
IMO, deflation is unavoidable and will bring an incredible amount of social stress. The likes of which we have never seen before. All they are doing now is delaying the inevitable while making things worse and wishing for a miracle.
