Shiller: US could likely to fall into deflationary spiral ala Japan

[kev374]

more good news, this one is from Yale economist Rober Shiller, HAPPY NEW YEAR 2008!!! 😀

http://seekingalpha.com/article/58651-shiller-warns-of-japanese-style-recession

[bsrsharma]

The good Professor is a smart man; but with Helicopter Ben in charge of FED, How can there be a sustained deflationary spiral? If Ben sets the FEDs rate to near zero and issues long term repo’s on funny paper, I can’t see how there can be deflation. Once you cause/induce reasonable perception/suspicion that US $ is not valuable, inflation has to kick in.

[bsrsharma]

The good Professor is a smart man; but with Helicopter Ben in charge of FED, How can there be a sustained deflationary spiral? If Ben sets the FEDs rate to near zero and issues long term repo’s on funny paper, I can’t see how there can be deflation. Once you cause/induce reasonable perception/suspicion that US $ is not valuable, inflation has to kick in.

[bsrsharma]

The good Professor is a smart man; but with Helicopter Ben in charge of FED, How can there be a sustained deflationary spiral? If Ben sets the FEDs rate to near zero and issues long term repo’s on funny paper, I can’t see how there can be deflation. Once you cause/induce reasonable perception/suspicion that US $ is not valuable, inflation has to kick in.

[bsrsharma]

The good Professor is a smart man; but with Helicopter Ben in charge of FED, How can there be a sustained deflationary spiral? If Ben sets the FEDs rate to near zero and issues long term repo’s on funny paper, I can’t see how there can be deflation. Once you cause/induce reasonable perception/suspicion that US $ is not valuable, inflation has to kick in.

[bsrsharma]

The good Professor is a smart man; but with Helicopter Ben in charge of FED, How can there be a sustained deflationary spiral? If Ben sets the FEDs rate to near zero and issues long term repo’s on funny paper, I can’t see how there can be deflation. Once you cause/induce reasonable perception/suspicion that US $ is not valuable, inflation has to kick in.

[cr]

At that point though, won’t Ben be forced to raise rates?

He’s going to have to sometime. And infation in reality, i.e. not “core inflation” is WAY up. Anyone recall what milk was a year ago?

[cr]

At that point though, won’t Ben be forced to raise rates?

He’s going to have to sometime. And infation in reality, i.e. not “core inflation” is WAY up. Anyone recall what milk was a year ago?

[cr]

At that point though, won’t Ben be forced to raise rates?

He’s going to have to sometime. And infation in reality, i.e. not “core inflation” is WAY up. Anyone recall what milk was a year ago?

[cr]

At that point though, won’t Ben be forced to raise rates?

He’s going to have to sometime. And infation in reality, i.e. not “core inflation” is WAY up. Anyone recall what milk was a year ago?

[cr]

At that point though, won’t Ben be forced to raise rates?

He’s going to have to sometime. And infation in reality, i.e. not “core inflation” is WAY up. Anyone recall what milk was a year ago?

[Eugene]

I don’t see any mention of an economy-wide deflationary spiral. He’s merely predicting a Japanese-style slump in house prices (sustained declines for 5+ years).

The good Professor is a smart man; but with Helicopter Ben in charge of FED, How can there be a sustained deflationary spiral? If Ben sets the FEDs rate to near zero and issues long term repo’s on funny paper, I can’t see how there can be deflation.

Agreed. Nationwide deflation is the boogeyman of modern economics. As long as we have an academic like Helicopter Ben in charge of the Fed, he will do everything in his power to prevent it. Repo’s on funny paper aren’t even necessary. You’ll find out what he’s really going to do if you read his speech that gave him his nickname. (The fact that it’s an election year makes this strategy very likely)

All you need is to prop up consumer spending somehow. Main deflationary risk right now is that people might choose to reduce discretionary spending and it would hurt prices of nontradables and services. Falling dollar is good because it puts more dollars in the hands of workers of exporting industries. Tax cuts or bailouts will work toward this end too.

Once you cause/induce reasonable perception/suspicion that US $ is not valuable, inflation has to kick in.

Inflation will kick in regardless of perception whether the US$ is valuable. This is a complex issue, anyway. It’s not enough to think that the US $ is valuable. You also need a good valuable alternative.

And infation in reality, i.e. not “core inflation” is WAY up. Anyone recall what milk was a year ago?

Inflation indexes include three broad categories of goods/services – non-discretionary tradable goods (milk, wheat, oil), discretionary tradable goods (cars, electronics, apparel), and nontradables (hotels, car insurance, restaurants). U.S. economy is 70% third category. Consumer retrenchment will not lead to consumers cutting down on milk. It will mean that more people stop travelling, buying car insurance and eating in restaurants. Thus decreasing prices of restaurant meals and hotel rooms, leaving some fraction of people in the restaurant and hotel business unemployed. Thus further lowering the amount of money available for discretionary spending. That’s the kind of deflation everyone is afraid of.

[Eugene]

I don’t see any mention of an economy-wide deflationary spiral. He’s merely predicting a Japanese-style slump in house prices (sustained declines for 5+ years).

The good Professor is a smart man; but with Helicopter Ben in charge of FED, How can there be a sustained deflationary spiral? If Ben sets the FEDs rate to near zero and issues long term repo’s on funny paper, I can’t see how there can be deflation.

Agreed. Nationwide deflation is the boogeyman of modern economics. As long as we have an academic like Helicopter Ben in charge of the Fed, he will do everything in his power to prevent it. Repo’s on funny paper aren’t even necessary. You’ll find out what he’s really going to do if you read his speech that gave him his nickname. (The fact that it’s an election year makes this strategy very likely)

All you need is to prop up consumer spending somehow. Main deflationary risk right now is that people might choose to reduce discretionary spending and it would hurt prices of nontradables and services. Falling dollar is good because it puts more dollars in the hands of workers of exporting industries. Tax cuts or bailouts will work toward this end too.

Once you cause/induce reasonable perception/suspicion that US $ is not valuable, inflation has to kick in.

Inflation will kick in regardless of perception whether the US$ is valuable. This is a complex issue, anyway. It’s not enough to think that the US $ is valuable. You also need a good valuable alternative.

And infation in reality, i.e. not “core inflation” is WAY up. Anyone recall what milk was a year ago?

Inflation indexes include three broad categories of goods/services – non-discretionary tradable goods (milk, wheat, oil), discretionary tradable goods (cars, electronics, apparel), and nontradables (hotels, car insurance, restaurants). U.S. economy is 70% third category. Consumer retrenchment will not lead to consumers cutting down on milk. It will mean that more people stop travelling, buying car insurance and eating in restaurants. Thus decreasing prices of restaurant meals and hotel rooms, leaving some fraction of people in the restaurant and hotel business unemployed. Thus further lowering the amount of money available for discretionary spending. That’s the kind of deflation everyone is afraid of.

[Eugene]

I don’t see any mention of an economy-wide deflationary spiral. He’s merely predicting a Japanese-style slump in house prices (sustained declines for 5+ years).

The good Professor is a smart man; but with Helicopter Ben in charge of FED, How can there be a sustained deflationary spiral? If Ben sets the FEDs rate to near zero and issues long term repo’s on funny paper, I can’t see how there can be deflation.

Agreed. Nationwide deflation is the boogeyman of modern economics. As long as we have an academic like Helicopter Ben in charge of the Fed, he will do everything in his power to prevent it. Repo’s on funny paper aren’t even necessary. You’ll find out what he’s really going to do if you read his speech that gave him his nickname. (The fact that it’s an election year makes this strategy very likely)

All you need is to prop up consumer spending somehow. Main deflationary risk right now is that people might choose to reduce discretionary spending and it would hurt prices of nontradables and services. Falling dollar is good because it puts more dollars in the hands of workers of exporting industries. Tax cuts or bailouts will work toward this end too.

Once you cause/induce reasonable perception/suspicion that US $ is not valuable, inflation has to kick in.

Inflation will kick in regardless of perception whether the US$ is valuable. This is a complex issue, anyway. It’s not enough to think that the US $ is valuable. You also need a good valuable alternative.

And infation in reality, i.e. not “core inflation” is WAY up. Anyone recall what milk was a year ago?

Inflation indexes include three broad categories of goods/services – non-discretionary tradable goods (milk, wheat, oil), discretionary tradable goods (cars, electronics, apparel), and nontradables (hotels, car insurance, restaurants). U.S. economy is 70% third category. Consumer retrenchment will not lead to consumers cutting down on milk. It will mean that more people stop travelling, buying car insurance and eating in restaurants. Thus decreasing prices of restaurant meals and hotel rooms, leaving some fraction of people in the restaurant and hotel business unemployed. Thus further lowering the amount of money available for discretionary spending. That’s the kind of deflation everyone is afraid of.

[Eugene]

I don’t see any mention of an economy-wide deflationary spiral. He’s merely predicting a Japanese-style slump in house prices (sustained declines for 5+ years).

The good Professor is a smart man; but with Helicopter Ben in charge of FED, How can there be a sustained deflationary spiral? If Ben sets the FEDs rate to near zero and issues long term repo’s on funny paper, I can’t see how there can be deflation.

Agreed. Nationwide deflation is the boogeyman of modern economics. As long as we have an academic like Helicopter Ben in charge of the Fed, he will do everything in his power to prevent it. Repo’s on funny paper aren’t even necessary. You’ll find out what he’s really going to do if you read his speech that gave him his nickname. (The fact that it’s an election year makes this strategy very likely)

All you need is to prop up consumer spending somehow. Main deflationary risk right now is that people might choose to reduce discretionary spending and it would hurt prices of nontradables and services. Falling dollar is good because it puts more dollars in the hands of workers of exporting industries. Tax cuts or bailouts will work toward this end too.

Once you cause/induce reasonable perception/suspicion that US $ is not valuable, inflation has to kick in.

Inflation will kick in regardless of perception whether the US$ is valuable. This is a complex issue, anyway. It’s not enough to think that the US $ is valuable. You also need a good valuable alternative.

And infation in reality, i.e. not “core inflation” is WAY up. Anyone recall what milk was a year ago?

Inflation indexes include three broad categories of goods/services – non-discretionary tradable goods (milk, wheat, oil), discretionary tradable goods (cars, electronics, apparel), and nontradables (hotels, car insurance, restaurants). U.S. economy is 70% third category. Consumer retrenchment will not lead to consumers cutting down on milk. It will mean that more people stop travelling, buying car insurance and eating in restaurants. Thus decreasing prices of restaurant meals and hotel rooms, leaving some fraction of people in the restaurant and hotel business unemployed. Thus further lowering the amount of money available for discretionary spending. That’s the kind of deflation everyone is afraid of.

[Author]

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