Inflation – Has it arrived?

[CA renter]

[quote=faterikcartman]”Fed Officials Mull Inflation as a Fix”

http://online.wsj.com/article/…%5B/quote%5D

It is so disturbing that Fed officials can only see inflation as the solution to our problems. Has nobody ever considered the fact that *deflation* might actually the the cheaper, more efficient, less-painful (to working people) solution?

Asset price inflation increases the wealth disparity, which is at the core of our problems, IMHO. Deflation hurts the wealthy (capitalists who derive most of their income from investments/speculation) most, while inflation hurts wage workers most.

When they choose inflation, they are clearly showing to whom their allegiance lies.

[urbanrealtor]

[quote=CA renter]
It is so disturbing that Fed officials can only see inflation as the solution to our problems. Has nobody ever considered the fact that *deflation* might actually the the cheaper, more efficient, less-painful (to working people) solution?
[/quote]

Ponder that for a minute.
In a world with 4% interest and 2% inflation, the effective interest rate is 2%.
In a world with 4% interest and 5% deflation (which is fairly modest), the effective interest rate is 9%.
This makes leverage significantly more costly.
Considering that effectively all economic advancement since the 1700’s has been achieved using funds that had leverage as a significant component, deflation would impact economic advancement noticeably.
The same would be true of housing leverage.

In other words, this would do to business what home value deflation did to housing.

If the debts are all toxic and the the things they bought are always going to be way cheaper than the debts, far fewer people will borrow and lots more will start to default on existing loans.

The only people who would benefit would be those who have big savings accounts.

And we are not a country of savers.

[urbanrealtor]

[quote=CA renter]
It is so disturbing that Fed officials can only see inflation as the solution to our problems. Has nobody ever considered the fact that *deflation* might actually the the cheaper, more efficient, less-painful (to working people) solution?
[/quote]

Ponder that for a minute.
In a world with 4% interest and 2% inflation, the effective interest rate is 2%.
In a world with 4% interest and 5% deflation (which is fairly modest), the effective interest rate is 9%.
This makes leverage significantly more costly.
Considering that effectively all economic advancement since the 1700’s has been achieved using funds that had leverage as a significant component, deflation would impact economic advancement noticeably.
The same would be true of housing leverage.

In other words, this would do to business what home value deflation did to housing.

If the debts are all toxic and the the things they bought are always going to be way cheaper than the debts, far fewer people will borrow and lots more will start to default on existing loans.

The only people who would benefit would be those who have big savings accounts.

And we are not a country of savers.

[urbanrealtor]

[quote=CA renter]
It is so disturbing that Fed officials can only see inflation as the solution to our problems. Has nobody ever considered the fact that *deflation* might actually the the cheaper, more efficient, less-painful (to working people) solution?
[/quote]

Ponder that for a minute.
In a world with 4% interest and 2% inflation, the effective interest rate is 2%.
In a world with 4% interest and 5% deflation (which is fairly modest), the effective interest rate is 9%.
This makes leverage significantly more costly.
Considering that effectively all economic advancement since the 1700’s has been achieved using funds that had leverage as a significant component, deflation would impact economic advancement noticeably.
The same would be true of housing leverage.

In other words, this would do to business what home value deflation did to housing.

If the debts are all toxic and the the things they bought are always going to be way cheaper than the debts, far fewer people will borrow and lots more will start to default on existing loans.

The only people who would benefit would be those who have big savings accounts.

And we are not a country of savers.

[urbanrealtor]

[quote=CA renter]
It is so disturbing that Fed officials can only see inflation as the solution to our problems. Has nobody ever considered the fact that *deflation* might actually the the cheaper, more efficient, less-painful (to working people) solution?
[/quote]

Ponder that for a minute.
In a world with 4% interest and 2% inflation, the effective interest rate is 2%.
In a world with 4% interest and 5% deflation (which is fairly modest), the effective interest rate is 9%.
This makes leverage significantly more costly.
Considering that effectively all economic advancement since the 1700’s has been achieved using funds that had leverage as a significant component, deflation would impact economic advancement noticeably.
The same would be true of housing leverage.

In other words, this would do to business what home value deflation did to housing.

If the debts are all toxic and the the things they bought are always going to be way cheaper than the debts, far fewer people will borrow and lots more will start to default on existing loans.

The only people who would benefit would be those who have big savings accounts.

And we are not a country of savers.

[urbanrealtor]

[quote=CA renter]
It is so disturbing that Fed officials can only see inflation as the solution to our problems. Has nobody ever considered the fact that *deflation* might actually the the cheaper, more efficient, less-painful (to working people) solution?
[/quote]

Ponder that for a minute.
In a world with 4% interest and 2% inflation, the effective interest rate is 2%.
In a world with 4% interest and 5% deflation (which is fairly modest), the effective interest rate is 9%.
This makes leverage significantly more costly.
Considering that effectively all economic advancement since the 1700’s has been achieved using funds that had leverage as a significant component, deflation would impact economic advancement noticeably.
The same would be true of housing leverage.

In other words, this would do to business what home value deflation did to housing.

If the debts are all toxic and the the things they bought are always going to be way cheaper than the debts, far fewer people will borrow and lots more will start to default on existing loans.

The only people who would benefit would be those who have big savings accounts.

And we are not a country of savers.

[GH]

Us Westerners are now required to compete with cheap offshore labor. There may or may not be asset inflation, but there will be no wage inflation. Perhaps a world in which we buy billion dollar houses on loan, then have our loans “modified” to fit our incomes will be the norm in the future?

[GH]

Us Westerners are now required to compete with cheap offshore labor. There may or may not be asset inflation, but there will be no wage inflation. Perhaps a world in which we buy billion dollar houses on loan, then have our loans “modified” to fit our incomes will be the norm in the future?

[GH]

Us Westerners are now required to compete with cheap offshore labor. There may or may not be asset inflation, but there will be no wage inflation. Perhaps a world in which we buy billion dollar houses on loan, then have our loans “modified” to fit our incomes will be the norm in the future?

[GH]

Us Westerners are now required to compete with cheap offshore labor. There may or may not be asset inflation, but there will be no wage inflation. Perhaps a world in which we buy billion dollar houses on loan, then have our loans “modified” to fit our incomes will be the norm in the future?

[GH]

Us Westerners are now required to compete with cheap offshore labor. There may or may not be asset inflation, but there will be no wage inflation. Perhaps a world in which we buy billion dollar houses on loan, then have our loans “modified” to fit our incomes will be the norm in the future?

[CA renter]

[quote=urbanrealtor][quote=CA renter]
It is so disturbing that Fed officials can only see inflation as the solution to our problems. Has nobody ever considered the fact that *deflation* might actually the the cheaper, more efficient, less-painful (to working people) solution?
[/quote]

Ponder that for a minute.
In a world with 4% interest and 2% inflation, the effective interest rate is 2%.
In a world with 4% interest and 5% deflation (which is fairly modest), the effective interest rate is 9%.
This makes leverage significantly more costly.
Considering that effectively all economic advancement since the 1700’s has been achieved using funds that had leverage as a significant component, deflation would impact economic advancement noticeably.
The same would be true of housing leverage.

In other words, this would do to business what home value deflation did to housing.

If the debts are all toxic and the the things they bought are always going to be way cheaper than the debts, far fewer people will borrow and lots more will start to default on existing loans.

The only people who would benefit would be those who have big savings accounts.

And we are not a country of savers.[/quote]

We’re not a nation of savers specifically because of what you pointed out above — normally prudent people have been forced to gamble and speculate because we’re afraid of losing purchasing power. This is exactly what I’d like to see reversed. Personally, I’m opposed to a debt-based monetary system that is controlled by those who benefit by creating debt slaves.

You hit the nail on the head. This is why deflation would reverse the wealth disparity and bring things back to a stable base (much lower than today, admittedly). I think it’s going to happen one way or another — by deflation or hyperinflation. You essentially get the same end result (massive poverty and civil unrest), but with deflation, the most prudent are rewarded while with inflation, the biggest speculators are rewarded. It’s a matter of choice which group we’d prefer to reward…I prefer to reward the more prudent and conservative people who can help us build a more stable foundation upon which we can grow a sustainable economy that is not so reliant upon debt.

[CA renter]

[quote=urbanrealtor][quote=CA renter]
It is so disturbing that Fed officials can only see inflation as the solution to our problems. Has nobody ever considered the fact that *deflation* might actually the the cheaper, more efficient, less-painful (to working people) solution?
[/quote]

Ponder that for a minute.
In a world with 4% interest and 2% inflation, the effective interest rate is 2%.
In a world with 4% interest and 5% deflation (which is fairly modest), the effective interest rate is 9%.
This makes leverage significantly more costly.
Considering that effectively all economic advancement since the 1700’s has been achieved using funds that had leverage as a significant component, deflation would impact economic advancement noticeably.
The same would be true of housing leverage.

In other words, this would do to business what home value deflation did to housing.

If the debts are all toxic and the the things they bought are always going to be way cheaper than the debts, far fewer people will borrow and lots more will start to default on existing loans.

The only people who would benefit would be those who have big savings accounts.

And we are not a country of savers.[/quote]

We’re not a nation of savers specifically because of what you pointed out above — normally prudent people have been forced to gamble and speculate because we’re afraid of losing purchasing power. This is exactly what I’d like to see reversed. Personally, I’m opposed to a debt-based monetary system that is controlled by those who benefit by creating debt slaves.

You hit the nail on the head. This is why deflation would reverse the wealth disparity and bring things back to a stable base (much lower than today, admittedly). I think it’s going to happen one way or another — by deflation or hyperinflation. You essentially get the same end result (massive poverty and civil unrest), but with deflation, the most prudent are rewarded while with inflation, the biggest speculators are rewarded. It’s a matter of choice which group we’d prefer to reward…I prefer to reward the more prudent and conservative people who can help us build a more stable foundation upon which we can grow a sustainable economy that is not so reliant upon debt.

[CA renter]

[quote=urbanrealtor][quote=CA renter]
It is so disturbing that Fed officials can only see inflation as the solution to our problems. Has nobody ever considered the fact that *deflation* might actually the the cheaper, more efficient, less-painful (to working people) solution?
[/quote]

Ponder that for a minute.
In a world with 4% interest and 2% inflation, the effective interest rate is 2%.
In a world with 4% interest and 5% deflation (which is fairly modest), the effective interest rate is 9%.
This makes leverage significantly more costly.
Considering that effectively all economic advancement since the 1700’s has been achieved using funds that had leverage as a significant component, deflation would impact economic advancement noticeably.
The same would be true of housing leverage.

In other words, this would do to business what home value deflation did to housing.

If the debts are all toxic and the the things they bought are always going to be way cheaper than the debts, far fewer people will borrow and lots more will start to default on existing loans.

The only people who would benefit would be those who have big savings accounts.

And we are not a country of savers.[/quote]

We’re not a nation of savers specifically because of what you pointed out above — normally prudent people have been forced to gamble and speculate because we’re afraid of losing purchasing power. This is exactly what I’d like to see reversed. Personally, I’m opposed to a debt-based monetary system that is controlled by those who benefit by creating debt slaves.

You hit the nail on the head. This is why deflation would reverse the wealth disparity and bring things back to a stable base (much lower than today, admittedly). I think it’s going to happen one way or another — by deflation or hyperinflation. You essentially get the same end result (massive poverty and civil unrest), but with deflation, the most prudent are rewarded while with inflation, the biggest speculators are rewarded. It’s a matter of choice which group we’d prefer to reward…I prefer to reward the more prudent and conservative people who can help us build a more stable foundation upon which we can grow a sustainable economy that is not so reliant upon debt.

[CA renter]

[quote=urbanrealtor][quote=CA renter]
It is so disturbing that Fed officials can only see inflation as the solution to our problems. Has nobody ever considered the fact that *deflation* might actually the the cheaper, more efficient, less-painful (to working people) solution?
[/quote]

Ponder that for a minute.
In a world with 4% interest and 2% inflation, the effective interest rate is 2%.
In a world with 4% interest and 5% deflation (which is fairly modest), the effective interest rate is 9%.
This makes leverage significantly more costly.
Considering that effectively all economic advancement since the 1700’s has been achieved using funds that had leverage as a significant component, deflation would impact economic advancement noticeably.
The same would be true of housing leverage.

In other words, this would do to business what home value deflation did to housing.

If the debts are all toxic and the the things they bought are always going to be way cheaper than the debts, far fewer people will borrow and lots more will start to default on existing loans.

The only people who would benefit would be those who have big savings accounts.

And we are not a country of savers.[/quote]

We’re not a nation of savers specifically because of what you pointed out above — normally prudent people have been forced to gamble and speculate because we’re afraid of losing purchasing power. This is exactly what I’d like to see reversed. Personally, I’m opposed to a debt-based monetary system that is controlled by those who benefit by creating debt slaves.

You hit the nail on the head. This is why deflation would reverse the wealth disparity and bring things back to a stable base (much lower than today, admittedly). I think it’s going to happen one way or another — by deflation or hyperinflation. You essentially get the same end result (massive poverty and civil unrest), but with deflation, the most prudent are rewarded while with inflation, the biggest speculators are rewarded. It’s a matter of choice which group we’d prefer to reward…I prefer to reward the more prudent and conservative people who can help us build a more stable foundation upon which we can grow a sustainable economy that is not so reliant upon debt.

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