couple of things to worry about for renters

[mrwrong]

For those who are sure deflation will be the outcome, it is important to keep in mind that in a fiat monetary system, central bank can always generate inflation if it wants to. So the real debate is if things get really bad such as serious deflation taking place, is it politically acceptable to print money to generate inflation? I don’t know the answer to this question. If I had to guess, I would say yes. If a serious deflation in fact happens, nobody wins, not even the prudent renters.

Also, the current FED chairman is not a stupid guy. He spent a considerable amount of his career studying the Great Depression. With the new auction system FED introduced lately, he has shown his willingness to try new things to handle a crisis.

Mr. Wrong

[barnaby33]

Mrwrong, you are partially correct. We have a fiat money system. We also have the beginnings of the same problem that we had in the great depression. The FED turned the liquidity spigot wide open, but the banks still wouldn’t lend, hence symptoms like the TED spread widening. Deflation only requires a lack of confidence on the part of banks to lend, or consumers to borrow. Either one will do the trick.

Josh

[barnaby33]

Mrwrong, you are partially correct. We have a fiat money system. We also have the beginnings of the same problem that we had in the great depression. The FED turned the liquidity spigot wide open, but the banks still wouldn’t lend, hence symptoms like the TED spread widening. Deflation only requires a lack of confidence on the part of banks to lend, or consumers to borrow. Either one will do the trick.

Josh

[barnaby33]

Mrwrong, you are partially correct. We have a fiat money system. We also have the beginnings of the same problem that we had in the great depression. The FED turned the liquidity spigot wide open, but the banks still wouldn’t lend, hence symptoms like the TED spread widening. Deflation only requires a lack of confidence on the part of banks to lend, or consumers to borrow. Either one will do the trick.

Josh

[barnaby33]

Mrwrong, you are partially correct. We have a fiat money system. We also have the beginnings of the same problem that we had in the great depression. The FED turned the liquidity spigot wide open, but the banks still wouldn’t lend, hence symptoms like the TED spread widening. Deflation only requires a lack of confidence on the part of banks to lend, or consumers to borrow. Either one will do the trick.

Josh

[barnaby33]

Mrwrong, you are partially correct. We have a fiat money system. We also have the beginnings of the same problem that we had in the great depression. The FED turned the liquidity spigot wide open, but the banks still wouldn’t lend, hence symptoms like the TED spread widening. Deflation only requires a lack of confidence on the part of banks to lend, or consumers to borrow. Either one will do the trick.

Josh

[RDeNiro]

Peter Schiff came out with an article on Friday arguing against defalation:

http://www.europac.net/externalframeset.asp?id=11164

check it out. The argument I haven’t read in this post that he brings up is the fact that there are so many dollars out there in reserves that might come back to purchase US assets. The other argument, which Mr. Wrong Already alluded to is the fact that we are no longer under the gold standard. So, even if prices deflate against gold, they will rise against the dollar if the Feds print enough money.

[RDeNiro]

Peter Schiff came out with an article on Friday arguing against defalation:

http://www.europac.net/externalframeset.asp?id=11164

check it out. The argument I haven’t read in this post that he brings up is the fact that there are so many dollars out there in reserves that might come back to purchase US assets. The other argument, which Mr. Wrong Already alluded to is the fact that we are no longer under the gold standard. So, even if prices deflate against gold, they will rise against the dollar if the Feds print enough money.

[RDeNiro]

Peter Schiff came out with an article on Friday arguing against defalation:

http://www.europac.net/externalframeset.asp?id=11164

check it out. The argument I haven’t read in this post that he brings up is the fact that there are so many dollars out there in reserves that might come back to purchase US assets. The other argument, which Mr. Wrong Already alluded to is the fact that we are no longer under the gold standard. So, even if prices deflate against gold, they will rise against the dollar if the Feds print enough money.

[RDeNiro]

Peter Schiff came out with an article on Friday arguing against defalation:

http://www.europac.net/externalframeset.asp?id=11164

check it out. The argument I haven’t read in this post that he brings up is the fact that there are so many dollars out there in reserves that might come back to purchase US assets. The other argument, which Mr. Wrong Already alluded to is the fact that we are no longer under the gold standard. So, even if prices deflate against gold, they will rise against the dollar if the Feds print enough money.

[RDeNiro]

Peter Schiff came out with an article on Friday arguing against defalation:

http://www.europac.net/externalframeset.asp?id=11164

check it out. The argument I haven’t read in this post that he brings up is the fact that there are so many dollars out there in reserves that might come back to purchase US assets. The other argument, which Mr. Wrong Already alluded to is the fact that we are no longer under the gold standard. So, even if prices deflate against gold, they will rise against the dollar if the Feds print enough money.

[mrwrong]

barnaby33, you are correct that the conventional monetary easing (i.e. lowering the FED fund rate) will not help in a truly deflationary environment. The FED can lower the interest rate to zero and banks still wouldn’t lend. However, the current FED chairman has said many times that he is willing to use unconventional methods.

Another quote possible outcome is stagflation, where we have a deflation in asset prices and inflation in everyday living costs, like 70’s. I’m not sure what the FED would do under such a scenario given their mandate to maintain price stability while maximizing employment. The US economy will probably just muddle through.

Mr. Wrong

[mrwrong]

barnaby33, you are correct that the conventional monetary easing (i.e. lowering the FED fund rate) will not help in a truly deflationary environment. The FED can lower the interest rate to zero and banks still wouldn’t lend. However, the current FED chairman has said many times that he is willing to use unconventional methods.

Another quote possible outcome is stagflation, where we have a deflation in asset prices and inflation in everyday living costs, like 70’s. I’m not sure what the FED would do under such a scenario given their mandate to maintain price stability while maximizing employment. The US economy will probably just muddle through.

Mr. Wrong

[mrwrong]

barnaby33, you are correct that the conventional monetary easing (i.e. lowering the FED fund rate) will not help in a truly deflationary environment. The FED can lower the interest rate to zero and banks still wouldn’t lend. However, the current FED chairman has said many times that he is willing to use unconventional methods.

Another quote possible outcome is stagflation, where we have a deflation in asset prices and inflation in everyday living costs, like 70’s. I’m not sure what the FED would do under such a scenario given their mandate to maintain price stability while maximizing employment. The US economy will probably just muddle through.

Mr. Wrong

[mrwrong]

barnaby33, you are correct that the conventional monetary easing (i.e. lowering the FED fund rate) will not help in a truly deflationary environment. The FED can lower the interest rate to zero and banks still wouldn’t lend. However, the current FED chairman has said many times that he is willing to use unconventional methods.

Another quote possible outcome is stagflation, where we have a deflation in asset prices and inflation in everyday living costs, like 70’s. I’m not sure what the FED would do under such a scenario given their mandate to maintain price stability while maximizing employment. The US economy will probably just muddle through.

Mr. Wrong

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