Visual Inflation/Deflation For Dummies

[Rich Toscano]

[quote=citydweller]So does this mean the stimulus really was necessary to avoid a downward, deflationary spiral?[/quote]

“A” stimulus, maybe, but “The” stimulus? (The one that mostly bailed out financial companies?) No… good writeup here:

http://www.ritholtz.com/blog/2010/08/bailout-counter-factual/

Also: I believe that the whole “consumers will put off purchases if prices are dropping” thing is way overblown, in this tutorial and elsewhere. People might put something off for a little while, but that would only last for so long because A) life goes on and B) people would eventually want to capitalize on the good deals. Look at the computer industry as evidence, prices are constantly dropping there and yet people somehow buy computers.

The more harmful aspect of deflation, in our society, is that if the society is highly indebted then deflation causes the real burden of the debt to rise.

[citydweller]

I love this line from the article “We don’t have alternative universe laboratories to run control bailout experiments,” (if only…)

Then he goes on to say “but we can imagine the alternative outcomes if different actions were taken.” With “imagine” being the operative word. Without the “alternative universe laboratories” we can only “know” what is actually happening.

Within my circle of close friends and family (admittedly not a large sampling), I don’t know of anyone who’s life has been “ruined” because of the financial meltdown and the steps that were taken to control it. Considering that 2 years ago there were predictions of complete financial meltdown, chaos, anarchy, great depression, etc., I consider “The” stimulus to have been successful, but I will concede that another type of stimulus could have been “more” successful.

Another line from the article, “The net result of this would have been more turmoil, lower stock prices, and a sharper, but much shorter economic contraction. It would have been painful and disruptive — like emergency surgery is — but its better than an exploded appendix.” I find a bit optimistic. I don’t think he’s taking into account the possibility of true “panic” that might have occurred had there been more turmoil and lower stock prices.

Personally, (and as someone who never made it past Econ 101) I was comforted by the thought of the government pouring money into the economy (I was vaguely aware of the downward deflationary spiral concept). I realize most of the money went to save the banks, but my mind was focusing up on the fact that teachers, policemen, firemen, government workers etc. would be keeping their jobs, and that unemployed people were getting their unemployment benefits extended.

So I guess what I’m saying is that in my opinion, “The” stimulus was more of a psychological stimulus and not something that can be proven with charts and graphs.

[citydweller]

I love this line from the article “We don’t have alternative universe laboratories to run control bailout experiments,” (if only…)

Then he goes on to say “but we can imagine the alternative outcomes if different actions were taken.” With “imagine” being the operative word. Without the “alternative universe laboratories” we can only “know” what is actually happening.

Within my circle of close friends and family (admittedly not a large sampling), I don’t know of anyone who’s life has been “ruined” because of the financial meltdown and the steps that were taken to control it. Considering that 2 years ago there were predictions of complete financial meltdown, chaos, anarchy, great depression, etc., I consider “The” stimulus to have been successful, but I will concede that another type of stimulus could have been “more” successful.

Another line from the article, “The net result of this would have been more turmoil, lower stock prices, and a sharper, but much shorter economic contraction. It would have been painful and disruptive — like emergency surgery is — but its better than an exploded appendix.” I find a bit optimistic. I don’t think he’s taking into account the possibility of true “panic” that might have occurred had there been more turmoil and lower stock prices.

Personally, (and as someone who never made it past Econ 101) I was comforted by the thought of the government pouring money into the economy (I was vaguely aware of the downward deflationary spiral concept). I realize most of the money went to save the banks, but my mind was focusing up on the fact that teachers, policemen, firemen, government workers etc. would be keeping their jobs, and that unemployed people were getting their unemployment benefits extended.

So I guess what I’m saying is that in my opinion, “The” stimulus was more of a psychological stimulus and not something that can be proven with charts and graphs.

[citydweller]

I love this line from the article “We don’t have alternative universe laboratories to run control bailout experiments,” (if only…)

Then he goes on to say “but we can imagine the alternative outcomes if different actions were taken.” With “imagine” being the operative word. Without the “alternative universe laboratories” we can only “know” what is actually happening.

Within my circle of close friends and family (admittedly not a large sampling), I don’t know of anyone who’s life has been “ruined” because of the financial meltdown and the steps that were taken to control it. Considering that 2 years ago there were predictions of complete financial meltdown, chaos, anarchy, great depression, etc., I consider “The” stimulus to have been successful, but I will concede that another type of stimulus could have been “more” successful.

Another line from the article, “The net result of this would have been more turmoil, lower stock prices, and a sharper, but much shorter economic contraction. It would have been painful and disruptive — like emergency surgery is — but its better than an exploded appendix.” I find a bit optimistic. I don’t think he’s taking into account the possibility of true “panic” that might have occurred had there been more turmoil and lower stock prices.

Personally, (and as someone who never made it past Econ 101) I was comforted by the thought of the government pouring money into the economy (I was vaguely aware of the downward deflationary spiral concept). I realize most of the money went to save the banks, but my mind was focusing up on the fact that teachers, policemen, firemen, government workers etc. would be keeping their jobs, and that unemployed people were getting their unemployment benefits extended.

So I guess what I’m saying is that in my opinion, “The” stimulus was more of a psychological stimulus and not something that can be proven with charts and graphs.

[citydweller]

I love this line from the article “We don’t have alternative universe laboratories to run control bailout experiments,” (if only…)

Then he goes on to say “but we can imagine the alternative outcomes if different actions were taken.” With “imagine” being the operative word. Without the “alternative universe laboratories” we can only “know” what is actually happening.

Within my circle of close friends and family (admittedly not a large sampling), I don’t know of anyone who’s life has been “ruined” because of the financial meltdown and the steps that were taken to control it. Considering that 2 years ago there were predictions of complete financial meltdown, chaos, anarchy, great depression, etc., I consider “The” stimulus to have been successful, but I will concede that another type of stimulus could have been “more” successful.

Another line from the article, “The net result of this would have been more turmoil, lower stock prices, and a sharper, but much shorter economic contraction. It would have been painful and disruptive — like emergency surgery is — but its better than an exploded appendix.” I find a bit optimistic. I don’t think he’s taking into account the possibility of true “panic” that might have occurred had there been more turmoil and lower stock prices.

Personally, (and as someone who never made it past Econ 101) I was comforted by the thought of the government pouring money into the economy (I was vaguely aware of the downward deflationary spiral concept). I realize most of the money went to save the banks, but my mind was focusing up on the fact that teachers, policemen, firemen, government workers etc. would be keeping their jobs, and that unemployed people were getting their unemployment benefits extended.

So I guess what I’m saying is that in my opinion, “The” stimulus was more of a psychological stimulus and not something that can be proven with charts and graphs.

[citydweller]

I love this line from the article “We don’t have alternative universe laboratories to run control bailout experiments,” (if only…)

Then he goes on to say “but we can imagine the alternative outcomes if different actions were taken.” With “imagine” being the operative word. Without the “alternative universe laboratories” we can only “know” what is actually happening.

Within my circle of close friends and family (admittedly not a large sampling), I don’t know of anyone who’s life has been “ruined” because of the financial meltdown and the steps that were taken to control it. Considering that 2 years ago there were predictions of complete financial meltdown, chaos, anarchy, great depression, etc., I consider “The” stimulus to have been successful, but I will concede that another type of stimulus could have been “more” successful.

Another line from the article, “The net result of this would have been more turmoil, lower stock prices, and a sharper, but much shorter economic contraction. It would have been painful and disruptive — like emergency surgery is — but its better than an exploded appendix.” I find a bit optimistic. I don’t think he’s taking into account the possibility of true “panic” that might have occurred had there been more turmoil and lower stock prices.

Personally, (and as someone who never made it past Econ 101) I was comforted by the thought of the government pouring money into the economy (I was vaguely aware of the downward deflationary spiral concept). I realize most of the money went to save the banks, but my mind was focusing up on the fact that teachers, policemen, firemen, government workers etc. would be keeping their jobs, and that unemployed people were getting their unemployment benefits extended.

So I guess what I’m saying is that in my opinion, “The” stimulus was more of a psychological stimulus and not something that can be proven with charts and graphs.

[citydweller]

And I’m not saying I don’t love your charts and graphs, because I do 🙂

[citydweller]

And I’m not saying I don’t love your charts and graphs, because I do 🙂

[citydweller]

And I’m not saying I don’t love your charts and graphs, because I do 🙂

[citydweller]

And I’m not saying I don’t love your charts and graphs, because I do 🙂

[citydweller]

And I’m not saying I don’t love your charts and graphs, because I do 🙂

[Rich Toscano]

Citydweller, the problem is that it’s too early to say that people haven’t suffered as a result of the stimulus… we haven’t had to pay for it yet. When the time comes that we are expected to actually start paying down our debt (or when the time comes that the world realizes that we’re not actually going to pay it down, more likely), that’s when the effectiveness or lack thereof of the stimulus will be seen.

[Rich Toscano]

Citydweller, the problem is that it’s too early to say that people haven’t suffered as a result of the stimulus… we haven’t had to pay for it yet. When the time comes that we are expected to actually start paying down our debt (or when the time comes that the world realizes that we’re not actually going to pay it down, more likely), that’s when the effectiveness or lack thereof of the stimulus will be seen.

[Rich Toscano]

Citydweller, the problem is that it’s too early to say that people haven’t suffered as a result of the stimulus… we haven’t had to pay for it yet. When the time comes that we are expected to actually start paying down our debt (or when the time comes that the world realizes that we’re not actually going to pay it down, more likely), that’s when the effectiveness or lack thereof of the stimulus will be seen.

[Rich Toscano]

Citydweller, the problem is that it’s too early to say that people haven’t suffered as a result of the stimulus… we haven’t had to pay for it yet. When the time comes that we are expected to actually start paying down our debt (or when the time comes that the world realizes that we’re not actually going to pay it down, more likely), that’s when the effectiveness or lack thereof of the stimulus will be seen.

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