Deflation and Entitlement Programs

[Ash Housewares]

It seems there is some debate about the future direction of the economy; namely, whether the recession we face will be inflationary or deflationary. For example, Mish had a good dialogue with Schiff:

part 1: http://www.safehaven.com/article-9083.htm

part 2: http://globaleconomicanalysis.blogspot.com/2007/12/not-your-fathers-deflation-rebuttal.html

part 3: http://globaleconomicanalysis.blogspot.com/2007/12/peter-schiff-replies-to-deflation.html

The deflation advocates seem to be winning. Minyanville is also on the deflation bandwagon from several articles I’ve read there.

I had always assumed that the recession would be inflationary, and my reasoning was something like “inflation is the ONLY way we can pay our debt commitments, most notably social security and medicare”. Not too sophisticated, I know, but it made sense at the time.

So my question is, since we now appear headed for deflation, how on earth are we going to pay our obligations?

[nostradamus]

Well if what’s going on at Victoria’s Secret, Pier 1 Imports, and Macy’s is any indication it is a deflationary recession. Or it might just be the holiday sales season. 😉

[bob007]

my pick is
some luxury goods may deflate. some essential goods and services will experience inflations.

[kewp]

Assuming one has stable income, or is sitting on a pile of cash (or stable commodities, like gold), how is deflation bad?

[(former)FormerSanDiegan]

Assuming one has stable income, or is sitting on a pile of cash (or stable commodities, like gold), how is deflation bad?

1. Something like 1/3 of the federal budget goes to debt service. Deflation means less economic activity as measured in dollars. At some point the debt service would overwhelm the budget.

2. In a deflationary environment it is advantageous to wait to purchase anything until the future. This results in depression of economic activity which means that there is no such thing as a “stable job” in a broad deflationary environment.

[(former)FormerSanDiegan]

Assuming one has stable income, or is sitting on a pile of cash (or stable commodities, like gold), how is deflation bad?

1. Something like 1/3 of the federal budget goes to debt service. Deflation means less economic activity as measured in dollars. At some point the debt service would overwhelm the budget.

2. In a deflationary environment it is advantageous to wait to purchase anything until the future. This results in depression of economic activity which means that there is no such thing as a “stable job” in a broad deflationary environment.

[(former)FormerSanDiegan]

Assuming one has stable income, or is sitting on a pile of cash (or stable commodities, like gold), how is deflation bad?

1. Something like 1/3 of the federal budget goes to debt service. Deflation means less economic activity as measured in dollars. At some point the debt service would overwhelm the budget.

2. In a deflationary environment it is advantageous to wait to purchase anything until the future. This results in depression of economic activity which means that there is no such thing as a “stable job” in a broad deflationary environment.

[(former)FormerSanDiegan]

Assuming one has stable income, or is sitting on a pile of cash (or stable commodities, like gold), how is deflation bad?

1. Something like 1/3 of the federal budget goes to debt service. Deflation means less economic activity as measured in dollars. At some point the debt service would overwhelm the budget.

2. In a deflationary environment it is advantageous to wait to purchase anything until the future. This results in depression of economic activity which means that there is no such thing as a “stable job” in a broad deflationary environment.

[(former)FormerSanDiegan]

Assuming one has stable income, or is sitting on a pile of cash (or stable commodities, like gold), how is deflation bad?

1. Something like 1/3 of the federal budget goes to debt service. Deflation means less economic activity as measured in dollars. At some point the debt service would overwhelm the budget.

2. In a deflationary environment it is advantageous to wait to purchase anything until the future. This results in depression of economic activity which means that there is no such thing as a “stable job” in a broad deflationary environment.

[kewp]

Assuming one has stable income, or is sitting on a pile of cash (or stable commodities, like gold), how is deflation bad?

[kewp]

Assuming one has stable income, or is sitting on a pile of cash (or stable commodities, like gold), how is deflation bad?

[kewp]

Assuming one has stable income, or is sitting on a pile of cash (or stable commodities, like gold), how is deflation bad?

[kewp]

Assuming one has stable income, or is sitting on a pile of cash (or stable commodities, like gold), how is deflation bad?

[bob007]

my pick is
some luxury goods may deflate. some essential goods and services will experience inflations.

[bob007]

my pick is
some luxury goods may deflate. some essential goods and services will experience inflations.

[bob007]

my pick is
some luxury goods may deflate. some essential goods and services will experience inflations.

[bob007]

my pick is
some luxury goods may deflate. some essential goods and services will experience inflations.

[nostradamus]

Well if what’s going on at Victoria’s Secret, Pier 1 Imports, and Macy’s is any indication it is a deflationary recession. Or it might just be the holiday sales season. 😉

[nostradamus]

Well if what’s going on at Victoria’s Secret, Pier 1 Imports, and Macy’s is any indication it is a deflationary recession. Or it might just be the holiday sales season. 😉

[nostradamus]

Well if what’s going on at Victoria’s Secret, Pier 1 Imports, and Macy’s is any indication it is a deflationary recession. Or it might just be the holiday sales season. 😉

[nostradamus]

Well if what’s going on at Victoria’s Secret, Pier 1 Imports, and Macy’s is any indication it is a deflationary recession. Or it might just be the holiday sales season. 😉

[Eugene]

The problem with Mish is his Austrian bias. Same goes for many other deflation advocates. Whenever you hear someone saying “the Fed is a private business”, or using the word “malinvestment”, or demanding to “flush bad debt from the system”, or accusing the government of understating the CPI for its evil purposes, that’s a dead giveaway.
When it comes to interpreting (and predicting) actions of the Federal Reserve, not to mention their possible outcomes, Austrian bias is a big obstacle.

On Minyanville, half the articles talking about deflation are written by Mish.

Peter Schiff isn’t much better. His economics views are very shallow.

I don’t recall seeing any good articles discussing inflation vs. deflation with enough attention to details. Such as: the distinction between tradable and non-tradable goods and the realization that American economy is 80% services and non-tradables; interplay between exchange rates, trade deficits, long-term interest rates, money supply, and Bretton Woods II; Phillips curve (unemployment vs. inflation); whether inflation = money supply = CPI, if not, why; monetary and fiscal tools available to the government beyond simple rate-fixing.

inflation is the ONLY way we can pay our debt commitments, most notably social security and medicare

Social security and medicare are indexed to inflation.

[asragov]

Long live the Austrians!

The “Austrian bias” is exactly why Mish so great.

Austrian economics is academically described here, but the basic idea is that central banks are bad at deciding what interest rates should be, and they are the root cause of inflation and many other financial disasters.

Also, fiat currencies tend to lose their value over time, while tangible assets such as gold retain them (they are no one else’s liability):

http://www.econlib.org/library/Enc/AustrianEconomics.html

I imagine that the majority of Piggingtons agree with Mish and other Austrians that artificially low interest rates (and bad fiscal policy that allows too much deduction of housing financing costs) has resulted in “malinvestment” (i.e. too much money invested in non-productive housing).

I have been following Mish and others for some time, and the Austrian view of the world is certainly not accurate in terms of timing, but who is? But now, as the greatest asset bubble in history deflates, their time has come.

I love the Austrians for their sense of history, their straight talk (i.e. Ron Paul), and ability to see through market manipulations:

Some additional Austrian (or Austrian-compatible) links:

http://www.lewrockwell.com/corrigan/corrigan23.html (Sean Corrigan has an archive at Lew Rockwell – this is from 2002!)

http://www.mises.org/story/2819 (the site is all Austrian, all the time)

http://www.house.gov/paul/tst/tst2007/tst092307.htm (read some of the Ron Paul “Straight Talk” columns before you criticize him too much)

P.S. You can get out of pension and medical obligations by changing the terms or simply reneging on them! Inflation is less messy, but by no means the only way.

P.P.S. Ron Paul’s bills to abolish the Federal Reserve never seem to get very far:

http://www.govtrack.us/congress/billtext.xpd?bill=h110-2755

[asragov]

Long live the Austrians!

The “Austrian bias” is exactly why Mish so great.

Austrian economics is academically described here, but the basic idea is that central banks are bad at deciding what interest rates should be, and they are the root cause of inflation and many other financial disasters.

Also, fiat currencies tend to lose their value over time, while tangible assets such as gold retain them (they are no one else’s liability):

http://www.econlib.org/library/Enc/AustrianEconomics.html

I imagine that the majority of Piggingtons agree with Mish and other Austrians that artificially low interest rates (and bad fiscal policy that allows too much deduction of housing financing costs) has resulted in “malinvestment” (i.e. too much money invested in non-productive housing).

I have been following Mish and others for some time, and the Austrian view of the world is certainly not accurate in terms of timing, but who is? But now, as the greatest asset bubble in history deflates, their time has come.

I love the Austrians for their sense of history, their straight talk (i.e. Ron Paul), and ability to see through market manipulations:

Some additional Austrian (or Austrian-compatible) links:

http://www.lewrockwell.com/corrigan/corrigan23.html (Sean Corrigan has an archive at Lew Rockwell – this is from 2002!)

http://www.mises.org/story/2819 (the site is all Austrian, all the time)

http://www.house.gov/paul/tst/tst2007/tst092307.htm (read some of the Ron Paul “Straight Talk” columns before you criticize him too much)

P.S. You can get out of pension and medical obligations by changing the terms or simply reneging on them! Inflation is less messy, but by no means the only way.

P.P.S. Ron Paul’s bills to abolish the Federal Reserve never seem to get very far:

http://www.govtrack.us/congress/billtext.xpd?bill=h110-2755

[asragov]

Long live the Austrians!

The “Austrian bias” is exactly why Mish so great.

Austrian economics is academically described here, but the basic idea is that central banks are bad at deciding what interest rates should be, and they are the root cause of inflation and many other financial disasters.

Also, fiat currencies tend to lose their value over time, while tangible assets such as gold retain them (they are no one else’s liability):

http://www.econlib.org/library/Enc/AustrianEconomics.html

I imagine that the majority of Piggingtons agree with Mish and other Austrians that artificially low interest rates (and bad fiscal policy that allows too much deduction of housing financing costs) has resulted in “malinvestment” (i.e. too much money invested in non-productive housing).

I have been following Mish and others for some time, and the Austrian view of the world is certainly not accurate in terms of timing, but who is? But now, as the greatest asset bubble in history deflates, their time has come.

I love the Austrians for their sense of history, their straight talk (i.e. Ron Paul), and ability to see through market manipulations:

Some additional Austrian (or Austrian-compatible) links:

http://www.lewrockwell.com/corrigan/corrigan23.html (Sean Corrigan has an archive at Lew Rockwell – this is from 2002!)

http://www.mises.org/story/2819 (the site is all Austrian, all the time)

http://www.house.gov/paul/tst/tst2007/tst092307.htm (read some of the Ron Paul “Straight Talk” columns before you criticize him too much)

P.S. You can get out of pension and medical obligations by changing the terms or simply reneging on them! Inflation is less messy, but by no means the only way.

P.P.S. Ron Paul’s bills to abolish the Federal Reserve never seem to get very far:

http://www.govtrack.us/congress/billtext.xpd?bill=h110-2755

[asragov]

Long live the Austrians!

The “Austrian bias” is exactly why Mish so great.

Austrian economics is academically described here, but the basic idea is that central banks are bad at deciding what interest rates should be, and they are the root cause of inflation and many other financial disasters.

Also, fiat currencies tend to lose their value over time, while tangible assets such as gold retain them (they are no one else’s liability):

http://www.econlib.org/library/Enc/AustrianEconomics.html

I imagine that the majority of Piggingtons agree with Mish and other Austrians that artificially low interest rates (and bad fiscal policy that allows too much deduction of housing financing costs) has resulted in “malinvestment” (i.e. too much money invested in non-productive housing).

I have been following Mish and others for some time, and the Austrian view of the world is certainly not accurate in terms of timing, but who is? But now, as the greatest asset bubble in history deflates, their time has come.

I love the Austrians for their sense of history, their straight talk (i.e. Ron Paul), and ability to see through market manipulations:

Some additional Austrian (or Austrian-compatible) links:

http://www.lewrockwell.com/corrigan/corrigan23.html (Sean Corrigan has an archive at Lew Rockwell – this is from 2002!)

http://www.mises.org/story/2819 (the site is all Austrian, all the time)

http://www.house.gov/paul/tst/tst2007/tst092307.htm (read some of the Ron Paul “Straight Talk” columns before you criticize him too much)

P.S. You can get out of pension and medical obligations by changing the terms or simply reneging on them! Inflation is less messy, but by no means the only way.

P.P.S. Ron Paul’s bills to abolish the Federal Reserve never seem to get very far:

http://www.govtrack.us/congress/billtext.xpd?bill=h110-2755

[asragov]

Long live the Austrians!

The “Austrian bias” is exactly why Mish so great.

Austrian economics is academically described here, but the basic idea is that central banks are bad at deciding what interest rates should be, and they are the root cause of inflation and many other financial disasters.

Also, fiat currencies tend to lose their value over time, while tangible assets such as gold retain them (they are no one else’s liability):

http://www.econlib.org/library/Enc/AustrianEconomics.html

I imagine that the majority of Piggingtons agree with Mish and other Austrians that artificially low interest rates (and bad fiscal policy that allows too much deduction of housing financing costs) has resulted in “malinvestment” (i.e. too much money invested in non-productive housing).

I have been following Mish and others for some time, and the Austrian view of the world is certainly not accurate in terms of timing, but who is? But now, as the greatest asset bubble in history deflates, their time has come.

I love the Austrians for their sense of history, their straight talk (i.e. Ron Paul), and ability to see through market manipulations:

Some additional Austrian (or Austrian-compatible) links:

http://www.lewrockwell.com/corrigan/corrigan23.html (Sean Corrigan has an archive at Lew Rockwell – this is from 2002!)

http://www.mises.org/story/2819 (the site is all Austrian, all the time)

http://www.house.gov/paul/tst/tst2007/tst092307.htm (read some of the Ron Paul “Straight Talk” columns before you criticize him too much)

P.S. You can get out of pension and medical obligations by changing the terms or simply reneging on them! Inflation is less messy, but by no means the only way.

P.P.S. Ron Paul’s bills to abolish the Federal Reserve never seem to get very far:

http://www.govtrack.us/congress/billtext.xpd?bill=h110-2755

[drunkle]

“I don’t recall seeing any good articles discussing inflation vs. deflation with enough attention to details. Such as: the distinction between tradable and non-tradable goods and the realization that American economy is 80% services and non-tradables; interplay between exchange rates, trade deficits, long-term interest rates, money supply, and Bretton Woods II; Phillips curve (unemployment vs. inflation); whether inflation = money supply = CPI, if not, why; monetary and fiscal tools available to the government beyond simple rate-fixing.

inflation is the ONLY way we can pay our debt commitments, most notably social security and medicare

Social security and medicare are indexed to inflation.”

are such details discussed by keynesian economists? in the same context as schiff or shiller… ie., 30 second blurbs on faux? or even articles in wsj?

garbage in, garbage out. if the cpi is flawed, and i think there is a very good case that it is, then everything else that based on the measurement of inflation is flawed. including your social security benefits that are “indexed” to “inflation”, gdp that is “adjusted” for inflation, inflationary comparisons themselves, ie., cost of oil in the 70’s vs today adjusted for “inflation”. how the hell can you have accurate analysis if the foundation, inflation, is “marked to fantasy”?

yeah, that’s right. i made a reference to cdo’s and the “mark to fantasy” standards there that makes evaluating bank assets impossible.

this also kinda smacks of global warming denial tactics; scientists are too stupid to add in calculations to account for the sun! likewise, mish is too stupid to recognize that the american consumer buys majority chinese goods!

[drunkle]

“I don’t recall seeing any good articles discussing inflation vs. deflation with enough attention to details. Such as: the distinction between tradable and non-tradable goods and the realization that American economy is 80% services and non-tradables; interplay between exchange rates, trade deficits, long-term interest rates, money supply, and Bretton Woods II; Phillips curve (unemployment vs. inflation); whether inflation = money supply = CPI, if not, why; monetary and fiscal tools available to the government beyond simple rate-fixing.

inflation is the ONLY way we can pay our debt commitments, most notably social security and medicare

Social security and medicare are indexed to inflation.”

are such details discussed by keynesian economists? in the same context as schiff or shiller… ie., 30 second blurbs on faux? or even articles in wsj?

garbage in, garbage out. if the cpi is flawed, and i think there is a very good case that it is, then everything else that based on the measurement of inflation is flawed. including your social security benefits that are “indexed” to “inflation”, gdp that is “adjusted” for inflation, inflationary comparisons themselves, ie., cost of oil in the 70’s vs today adjusted for “inflation”. how the hell can you have accurate analysis if the foundation, inflation, is “marked to fantasy”?

yeah, that’s right. i made a reference to cdo’s and the “mark to fantasy” standards there that makes evaluating bank assets impossible.

this also kinda smacks of global warming denial tactics; scientists are too stupid to add in calculations to account for the sun! likewise, mish is too stupid to recognize that the american consumer buys majority chinese goods!

[drunkle]

“I don’t recall seeing any good articles discussing inflation vs. deflation with enough attention to details. Such as: the distinction between tradable and non-tradable goods and the realization that American economy is 80% services and non-tradables; interplay between exchange rates, trade deficits, long-term interest rates, money supply, and Bretton Woods II; Phillips curve (unemployment vs. inflation); whether inflation = money supply = CPI, if not, why; monetary and fiscal tools available to the government beyond simple rate-fixing.

inflation is the ONLY way we can pay our debt commitments, most notably social security and medicare

Social security and medicare are indexed to inflation.”

are such details discussed by keynesian economists? in the same context as schiff or shiller… ie., 30 second blurbs on faux? or even articles in wsj?

garbage in, garbage out. if the cpi is flawed, and i think there is a very good case that it is, then everything else that based on the measurement of inflation is flawed. including your social security benefits that are “indexed” to “inflation”, gdp that is “adjusted” for inflation, inflationary comparisons themselves, ie., cost of oil in the 70’s vs today adjusted for “inflation”. how the hell can you have accurate analysis if the foundation, inflation, is “marked to fantasy”?

yeah, that’s right. i made a reference to cdo’s and the “mark to fantasy” standards there that makes evaluating bank assets impossible.

this also kinda smacks of global warming denial tactics; scientists are too stupid to add in calculations to account for the sun! likewise, mish is too stupid to recognize that the american consumer buys majority chinese goods!

[drunkle]

“I don’t recall seeing any good articles discussing inflation vs. deflation with enough attention to details. Such as: the distinction between tradable and non-tradable goods and the realization that American economy is 80% services and non-tradables; interplay between exchange rates, trade deficits, long-term interest rates, money supply, and Bretton Woods II; Phillips curve (unemployment vs. inflation); whether inflation = money supply = CPI, if not, why; monetary and fiscal tools available to the government beyond simple rate-fixing.

inflation is the ONLY way we can pay our debt commitments, most notably social security and medicare

Social security and medicare are indexed to inflation.”

are such details discussed by keynesian economists? in the same context as schiff or shiller… ie., 30 second blurbs on faux? or even articles in wsj?

garbage in, garbage out. if the cpi is flawed, and i think there is a very good case that it is, then everything else that based on the measurement of inflation is flawed. including your social security benefits that are “indexed” to “inflation”, gdp that is “adjusted” for inflation, inflationary comparisons themselves, ie., cost of oil in the 70’s vs today adjusted for “inflation”. how the hell can you have accurate analysis if the foundation, inflation, is “marked to fantasy”?

yeah, that’s right. i made a reference to cdo’s and the “mark to fantasy” standards there that makes evaluating bank assets impossible.

this also kinda smacks of global warming denial tactics; scientists are too stupid to add in calculations to account for the sun! likewise, mish is too stupid to recognize that the american consumer buys majority chinese goods!

[drunkle]

“I don’t recall seeing any good articles discussing inflation vs. deflation with enough attention to details. Such as: the distinction between tradable and non-tradable goods and the realization that American economy is 80% services and non-tradables; interplay between exchange rates, trade deficits, long-term interest rates, money supply, and Bretton Woods II; Phillips curve (unemployment vs. inflation); whether inflation = money supply = CPI, if not, why; monetary and fiscal tools available to the government beyond simple rate-fixing.

inflation is the ONLY way we can pay our debt commitments, most notably social security and medicare

Social security and medicare are indexed to inflation.”

are such details discussed by keynesian economists? in the same context as schiff or shiller… ie., 30 second blurbs on faux? or even articles in wsj?

garbage in, garbage out. if the cpi is flawed, and i think there is a very good case that it is, then everything else that based on the measurement of inflation is flawed. including your social security benefits that are “indexed” to “inflation”, gdp that is “adjusted” for inflation, inflationary comparisons themselves, ie., cost of oil in the 70’s vs today adjusted for “inflation”. how the hell can you have accurate analysis if the foundation, inflation, is “marked to fantasy”?

yeah, that’s right. i made a reference to cdo’s and the “mark to fantasy” standards there that makes evaluating bank assets impossible.

this also kinda smacks of global warming denial tactics; scientists are too stupid to add in calculations to account for the sun! likewise, mish is too stupid to recognize that the american consumer buys majority chinese goods!

[Eugene]

The problem with Mish is his Austrian bias. Same goes for many other deflation advocates. Whenever you hear someone saying “the Fed is a private business”, or using the word “malinvestment”, or demanding to “flush bad debt from the system”, or accusing the government of understating the CPI for its evil purposes, that’s a dead giveaway.
When it comes to interpreting (and predicting) actions of the Federal Reserve, not to mention their possible outcomes, Austrian bias is a big obstacle.

On Minyanville, half the articles talking about deflation are written by Mish.

Peter Schiff isn’t much better. His economics views are very shallow.

I don’t recall seeing any good articles discussing inflation vs. deflation with enough attention to details. Such as: the distinction between tradable and non-tradable goods and the realization that American economy is 80% services and non-tradables; interplay between exchange rates, trade deficits, long-term interest rates, money supply, and Bretton Woods II; Phillips curve (unemployment vs. inflation); whether inflation = money supply = CPI, if not, why; monetary and fiscal tools available to the government beyond simple rate-fixing.

inflation is the ONLY way we can pay our debt commitments, most notably social security and medicare

Social security and medicare are indexed to inflation.

[Eugene]

The problem with Mish is his Austrian bias. Same goes for many other deflation advocates. Whenever you hear someone saying “the Fed is a private business”, or using the word “malinvestment”, or demanding to “flush bad debt from the system”, or accusing the government of understating the CPI for its evil purposes, that’s a dead giveaway.
When it comes to interpreting (and predicting) actions of the Federal Reserve, not to mention their possible outcomes, Austrian bias is a big obstacle.

On Minyanville, half the articles talking about deflation are written by Mish.

Peter Schiff isn’t much better. His economics views are very shallow.

I don’t recall seeing any good articles discussing inflation vs. deflation with enough attention to details. Such as: the distinction between tradable and non-tradable goods and the realization that American economy is 80% services and non-tradables; interplay between exchange rates, trade deficits, long-term interest rates, money supply, and Bretton Woods II; Phillips curve (unemployment vs. inflation); whether inflation = money supply = CPI, if not, why; monetary and fiscal tools available to the government beyond simple rate-fixing.

inflation is the ONLY way we can pay our debt commitments, most notably social security and medicare

Social security and medicare are indexed to inflation.

[Eugene]

The problem with Mish is his Austrian bias. Same goes for many other deflation advocates. Whenever you hear someone saying “the Fed is a private business”, or using the word “malinvestment”, or demanding to “flush bad debt from the system”, or accusing the government of understating the CPI for its evil purposes, that’s a dead giveaway.
When it comes to interpreting (and predicting) actions of the Federal Reserve, not to mention their possible outcomes, Austrian bias is a big obstacle.

On Minyanville, half the articles talking about deflation are written by Mish.

Peter Schiff isn’t much better. His economics views are very shallow.

I don’t recall seeing any good articles discussing inflation vs. deflation with enough attention to details. Such as: the distinction between tradable and non-tradable goods and the realization that American economy is 80% services and non-tradables; interplay between exchange rates, trade deficits, long-term interest rates, money supply, and Bretton Woods II; Phillips curve (unemployment vs. inflation); whether inflation = money supply = CPI, if not, why; monetary and fiscal tools available to the government beyond simple rate-fixing.

inflation is the ONLY way we can pay our debt commitments, most notably social security and medicare

Social security and medicare are indexed to inflation.

[Eugene]

The problem with Mish is his Austrian bias. Same goes for many other deflation advocates. Whenever you hear someone saying “the Fed is a private business”, or using the word “malinvestment”, or demanding to “flush bad debt from the system”, or accusing the government of understating the CPI for its evil purposes, that’s a dead giveaway.
When it comes to interpreting (and predicting) actions of the Federal Reserve, not to mention their possible outcomes, Austrian bias is a big obstacle.

On Minyanville, half the articles talking about deflation are written by Mish.

Peter Schiff isn’t much better. His economics views are very shallow.

I don’t recall seeing any good articles discussing inflation vs. deflation with enough attention to details. Such as: the distinction between tradable and non-tradable goods and the realization that American economy is 80% services and non-tradables; interplay between exchange rates, trade deficits, long-term interest rates, money supply, and Bretton Woods II; Phillips curve (unemployment vs. inflation); whether inflation = money supply = CPI, if not, why; monetary and fiscal tools available to the government beyond simple rate-fixing.

inflation is the ONLY way we can pay our debt commitments, most notably social security and medicare

Social security and medicare are indexed to inflation.

[mrwrong]

This topic comes up from time to time. The inflation camp believes the only way to get out of our current mess is to inflate the debt away. The deflation camp acknowledges the inflation attempt, but argues it will fail. They point to Japan as a proof. Central bank there cut interest rate to zero. Deflation still took hold and has lasted for more than a decade.

Personally I’m not convinced either way. I’m assuming the truth is somewhere in the middle, in which he FED will try to slowly inflate the debt away without causing runaway inflation. Not easy to accomplish to say the least, but the longer they can drag on this process, the better the final outcome will be for everybody.

Mr. Wrong

[mrwrong]

This topic comes up from time to time. The inflation camp believes the only way to get out of our current mess is to inflate the debt away. The deflation camp acknowledges the inflation attempt, but argues it will fail. They point to Japan as a proof. Central bank there cut interest rate to zero. Deflation still took hold and has lasted for more than a decade.

Personally I’m not convinced either way. I’m assuming the truth is somewhere in the middle, in which he FED will try to slowly inflate the debt away without causing runaway inflation. Not easy to accomplish to say the least, but the longer they can drag on this process, the better the final outcome will be for everybody.

Mr. Wrong

[mrwrong]

This topic comes up from time to time. The inflation camp believes the only way to get out of our current mess is to inflate the debt away. The deflation camp acknowledges the inflation attempt, but argues it will fail. They point to Japan as a proof. Central bank there cut interest rate to zero. Deflation still took hold and has lasted for more than a decade.

Personally I’m not convinced either way. I’m assuming the truth is somewhere in the middle, in which he FED will try to slowly inflate the debt away without causing runaway inflation. Not easy to accomplish to say the least, but the longer they can drag on this process, the better the final outcome will be for everybody.

Mr. Wrong

[mrwrong]

This topic comes up from time to time. The inflation camp believes the only way to get out of our current mess is to inflate the debt away. The deflation camp acknowledges the inflation attempt, but argues it will fail. They point to Japan as a proof. Central bank there cut interest rate to zero. Deflation still took hold and has lasted for more than a decade.

Personally I’m not convinced either way. I’m assuming the truth is somewhere in the middle, in which he FED will try to slowly inflate the debt away without causing runaway inflation. Not easy to accomplish to say the least, but the longer they can drag on this process, the better the final outcome will be for everybody.

Mr. Wrong

[mrwrong]

This topic comes up from time to time. The inflation camp believes the only way to get out of our current mess is to inflate the debt away. The deflation camp acknowledges the inflation attempt, but argues it will fail. They point to Japan as a proof. Central bank there cut interest rate to zero. Deflation still took hold and has lasted for more than a decade.

Personally I’m not convinced either way. I’m assuming the truth is somewhere in the middle, in which he FED will try to slowly inflate the debt away without causing runaway inflation. Not easy to accomplish to say the least, but the longer they can drag on this process, the better the final outcome will be for everybody.

Mr. Wrong

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