[quote=CA renter]Wages are stickier than prices. Workers’ purchasing power rises, while “capitalists” lose purchasing power. It reverses an unhealthy wealth disparity that almost always precedes deflationary periods — there is no more money to be pulled from the bottom.
Deflation is healthy and necessary. It is what restores equilibrium and corrects unhealthy imbalances.
Yes, deflationary collapses can be hard; jobs are lost, and people see the value of their assets fall, but there is always a floor in a deflationary collapse. There is no ceiling in an inflationary collapse, and inflation causes far, far more damage over the long run, IMHO.[/quote]
Answer this. What is the root cause of todays recession? OK, DEBT!!! Not government debt, but personal debt used to buy houses, cars, TV’s etc.
Two trillion dollars or this debt has been transferred to the national debt to avoid our banks collapsing. In Iceland the citizens are being asked to pay for private bank losses and the same is true in Ireland, Greece, Portugal, Spain and yes England as well. So in large numbers personal debt IS nationalized, which makes sense since our government is really just the representation of the citizens.
IF we do the austerity thing, and millions more are driven into bankruptcy and foreclosure. Millions of businesses fail and default and our cities and states default, then this debt too will be nationalized. (Or many investors (pensioners) will have to accept their money was loaned out and will not be repaid).
Austerity would have been fine instead of our debt bubble, but now that we have the debt it has to be dealt with. It is NOT possible to repay this debt without growth which means default or inflation.
