Visual Inflation/Deflation For Dummies

[CA renter]

[quote=Nor-LA-SD-guy]Here is my two cents on this.

The vast wealth of our country is tied up in leveraged real estate, and most property purchased in the last decade is under water. There can be no positive economic resolution until this is dealt with,

People cannot move, cannot refinance, cannot relocate cannot invest in other assets or industries.

In essence the economy is stuck until home prices get back near peak .

No policy
No road construction
No Train track
No Loan Mod program

Will fix this.

Some day the Gov is going to figure that out.

This is of course just my thoughts.[/quote]

An even better idea would be to foreclose on everyone who isn’t able/willing to pay their mortgages, let prices go back to normal (pre-bubble/2001 prices), and wipe out that debt for good.

Until we do this, it will never be fixed.

The only way to get housing prices back to peak is if the govt continually gives (not lends) new buyers more and more money with which to buy houses, OR…give everyone bonus-buck checks and destroy our currency.

[CA renter]

[quote=AN][quote=CA renter]
I’m a long-time deflationist bear, but even I have certain price levels and conditions in my mind where I would start buying. I don’t believe for a moment that everyone would stand back and let prices drop to zero.[/quote]
I don’t know about you but the instant I see people around me losing jobs and getting pay cut, I’m going to make sure I CUT EVERYTHING that’s not a necessity. Doesn’t matter how cheap the BMW is, it’s still more expensive than continue to drive your old but working Civic. Until I see light at the end of the tunnel, there will be no frivolous spending, even if things are cheap. Cheap things still require money to be bought and if you lose your job, you have to learn to conserve your money. Just ask people who truly have lived through the depression.
[quote=CA renter]
The wealthiest (asset owners/creditors) would be hurt the most in a deflationary environment — and they benefit the most in an inflationary environment, too. Their “wealth” is dependent on stable/rising asset prices, while the “wealth” of workers is dependent upon wages. Deflation actually helps working people because wages are fairly sticky on the downside and their income affords them greater purchasing power (assuming asset prices decrease faster than wages decrease), while harming investors whose assets lose value with deflation.[/quote]
Uh, that’s a little off in your generalization there. Deflation only helps working people of those working people don’t have hard asset (i.e. houses, gold, etc.) The question is, how many working people do you know that have no asset vs how many working people you know that have asset?[/quote]

Wages/jobs are much more important to most working people than asset prices (usually only their houses and maybe some stocks in their retirement plans). Without wages, they cannot live. If asset prices fall, it might not be pleasant, but at least they could survive just the same as when their asset prices were higher.

NOBODY should be taking on more debt while using “rising prices” as an excuse. You are NOT “extracting equity” when you cash-out or get a HELOC. What you are doing is taking on more debt than anyone would be willing to lend to you under normal circumstances, because you are giving them the right to foreclose on your house if you default. Once people get this through their thick heads, we can heal from this mess.

[CA renter]

[quote=AN][quote=CA renter]
I’m a long-time deflationist bear, but even I have certain price levels and conditions in my mind where I would start buying. I don’t believe for a moment that everyone would stand back and let prices drop to zero.[/quote]
I don’t know about you but the instant I see people around me losing jobs and getting pay cut, I’m going to make sure I CUT EVERYTHING that’s not a necessity. Doesn’t matter how cheap the BMW is, it’s still more expensive than continue to drive your old but working Civic. Until I see light at the end of the tunnel, there will be no frivolous spending, even if things are cheap. Cheap things still require money to be bought and if you lose your job, you have to learn to conserve your money. Just ask people who truly have lived through the depression.
[quote=CA renter]
The wealthiest (asset owners/creditors) would be hurt the most in a deflationary environment — and they benefit the most in an inflationary environment, too. Their “wealth” is dependent on stable/rising asset prices, while the “wealth” of workers is dependent upon wages. Deflation actually helps working people because wages are fairly sticky on the downside and their income affords them greater purchasing power (assuming asset prices decrease faster than wages decrease), while harming investors whose assets lose value with deflation.[/quote]
Uh, that’s a little off in your generalization there. Deflation only helps working people of those working people don’t have hard asset (i.e. houses, gold, etc.) The question is, how many working people do you know that have no asset vs how many working people you know that have asset?[/quote]

Wages/jobs are much more important to most working people than asset prices (usually only their houses and maybe some stocks in their retirement plans). Without wages, they cannot live. If asset prices fall, it might not be pleasant, but at least they could survive just the same as when their asset prices were higher.

NOBODY should be taking on more debt while using “rising prices” as an excuse. You are NOT “extracting equity” when you cash-out or get a HELOC. What you are doing is taking on more debt than anyone would be willing to lend to you under normal circumstances, because you are giving them the right to foreclose on your house if you default. Once people get this through their thick heads, we can heal from this mess.

[CA renter]

[quote=AN][quote=CA renter]
I’m a long-time deflationist bear, but even I have certain price levels and conditions in my mind where I would start buying. I don’t believe for a moment that everyone would stand back and let prices drop to zero.[/quote]
I don’t know about you but the instant I see people around me losing jobs and getting pay cut, I’m going to make sure I CUT EVERYTHING that’s not a necessity. Doesn’t matter how cheap the BMW is, it’s still more expensive than continue to drive your old but working Civic. Until I see light at the end of the tunnel, there will be no frivolous spending, even if things are cheap. Cheap things still require money to be bought and if you lose your job, you have to learn to conserve your money. Just ask people who truly have lived through the depression.
[quote=CA renter]
The wealthiest (asset owners/creditors) would be hurt the most in a deflationary environment — and they benefit the most in an inflationary environment, too. Their “wealth” is dependent on stable/rising asset prices, while the “wealth” of workers is dependent upon wages. Deflation actually helps working people because wages are fairly sticky on the downside and their income affords them greater purchasing power (assuming asset prices decrease faster than wages decrease), while harming investors whose assets lose value with deflation.[/quote]
Uh, that’s a little off in your generalization there. Deflation only helps working people of those working people don’t have hard asset (i.e. houses, gold, etc.) The question is, how many working people do you know that have no asset vs how many working people you know that have asset?[/quote]

Wages/jobs are much more important to most working people than asset prices (usually only their houses and maybe some stocks in their retirement plans). Without wages, they cannot live. If asset prices fall, it might not be pleasant, but at least they could survive just the same as when their asset prices were higher.

NOBODY should be taking on more debt while using “rising prices” as an excuse. You are NOT “extracting equity” when you cash-out or get a HELOC. What you are doing is taking on more debt than anyone would be willing to lend to you under normal circumstances, because you are giving them the right to foreclose on your house if you default. Once people get this through their thick heads, we can heal from this mess.

[CA renter]

[quote=AN][quote=CA renter]
I’m a long-time deflationist bear, but even I have certain price levels and conditions in my mind where I would start buying. I don’t believe for a moment that everyone would stand back and let prices drop to zero.[/quote]
I don’t know about you but the instant I see people around me losing jobs and getting pay cut, I’m going to make sure I CUT EVERYTHING that’s not a necessity. Doesn’t matter how cheap the BMW is, it’s still more expensive than continue to drive your old but working Civic. Until I see light at the end of the tunnel, there will be no frivolous spending, even if things are cheap. Cheap things still require money to be bought and if you lose your job, you have to learn to conserve your money. Just ask people who truly have lived through the depression.
[quote=CA renter]
The wealthiest (asset owners/creditors) would be hurt the most in a deflationary environment — and they benefit the most in an inflationary environment, too. Their “wealth” is dependent on stable/rising asset prices, while the “wealth” of workers is dependent upon wages. Deflation actually helps working people because wages are fairly sticky on the downside and their income affords them greater purchasing power (assuming asset prices decrease faster than wages decrease), while harming investors whose assets lose value with deflation.[/quote]
Uh, that’s a little off in your generalization there. Deflation only helps working people of those working people don’t have hard asset (i.e. houses, gold, etc.) The question is, how many working people do you know that have no asset vs how many working people you know that have asset?[/quote]

Wages/jobs are much more important to most working people than asset prices (usually only their houses and maybe some stocks in their retirement plans). Without wages, they cannot live. If asset prices fall, it might not be pleasant, but at least they could survive just the same as when their asset prices were higher.

NOBODY should be taking on more debt while using “rising prices” as an excuse. You are NOT “extracting equity” when you cash-out or get a HELOC. What you are doing is taking on more debt than anyone would be willing to lend to you under normal circumstances, because you are giving them the right to foreclose on your house if you default. Once people get this through their thick heads, we can heal from this mess.

[CA renter]

[quote=AN][quote=CA renter]
I’m a long-time deflationist bear, but even I have certain price levels and conditions in my mind where I would start buying. I don’t believe for a moment that everyone would stand back and let prices drop to zero.[/quote]
I don’t know about you but the instant I see people around me losing jobs and getting pay cut, I’m going to make sure I CUT EVERYTHING that’s not a necessity. Doesn’t matter how cheap the BMW is, it’s still more expensive than continue to drive your old but working Civic. Until I see light at the end of the tunnel, there will be no frivolous spending, even if things are cheap. Cheap things still require money to be bought and if you lose your job, you have to learn to conserve your money. Just ask people who truly have lived through the depression.
[quote=CA renter]
The wealthiest (asset owners/creditors) would be hurt the most in a deflationary environment — and they benefit the most in an inflationary environment, too. Their “wealth” is dependent on stable/rising asset prices, while the “wealth” of workers is dependent upon wages. Deflation actually helps working people because wages are fairly sticky on the downside and their income affords them greater purchasing power (assuming asset prices decrease faster than wages decrease), while harming investors whose assets lose value with deflation.[/quote]
Uh, that’s a little off in your generalization there. Deflation only helps working people of those working people don’t have hard asset (i.e. houses, gold, etc.) The question is, how many working people do you know that have no asset vs how many working people you know that have asset?[/quote]

Wages/jobs are much more important to most working people than asset prices (usually only their houses and maybe some stocks in their retirement plans). Without wages, they cannot live. If asset prices fall, it might not be pleasant, but at least they could survive just the same as when their asset prices were higher.

NOBODY should be taking on more debt while using “rising prices” as an excuse. You are NOT “extracting equity” when you cash-out or get a HELOC. What you are doing is taking on more debt than anyone would be willing to lend to you under normal circumstances, because you are giving them the right to foreclose on your house if you default. Once people get this through their thick heads, we can heal from this mess.

[CA renter]

[quote=pri_dk]
I agree that consumers don’t often bother with the math – when they want something they buy it. However, producers (and investors) will always do the math. I think the consumer side of this is often emphasized in these sorts of explanations just because it is more familiar to ordinary readers.[/quote]

Good argument, pri_dk. It’s the only compelling argument I’ve seen regarding the downside of deflation.

[CA renter]

[quote=pri_dk]
I agree that consumers don’t often bother with the math – when they want something they buy it. However, producers (and investors) will always do the math. I think the consumer side of this is often emphasized in these sorts of explanations just because it is more familiar to ordinary readers.[/quote]

Good argument, pri_dk. It’s the only compelling argument I’ve seen regarding the downside of deflation.

[CA renter]

[quote=pri_dk]
I agree that consumers don’t often bother with the math – when they want something they buy it. However, producers (and investors) will always do the math. I think the consumer side of this is often emphasized in these sorts of explanations just because it is more familiar to ordinary readers.[/quote]

Good argument, pri_dk. It’s the only compelling argument I’ve seen regarding the downside of deflation.

[CA renter]

[quote=pri_dk]
I agree that consumers don’t often bother with the math – when they want something they buy it. However, producers (and investors) will always do the math. I think the consumer side of this is often emphasized in these sorts of explanations just because it is more familiar to ordinary readers.[/quote]

Good argument, pri_dk. It’s the only compelling argument I’ve seen regarding the downside of deflation.

[CA renter]

[quote=pri_dk]
I agree that consumers don’t often bother with the math – when they want something they buy it. However, producers (and investors) will always do the math. I think the consumer side of this is often emphasized in these sorts of explanations just because it is more familiar to ordinary readers.[/quote]

Good argument, pri_dk. It’s the only compelling argument I’ve seen regarding the downside of deflation.

[Nor-LA-SD-guy]

Unfortunately just letting home prices drop to 2001 etc,, will not solve the economic problems for most or the Gov (although I think it will probably happen anyway in most locals) but it won’t help the economy.

Sure it will be great for the 15% or so with a lot of cash in the bank and no debt,

But that does not match the majority of people in the U.S.A. (or our Government) and will just make the unemployment problems worse not better (Gov needs high home prices to keep spending).

It is just going to be a long slow crawl because it’s political suicide to say hey why don’t we just inflate our way out of this mess.

Oh well I guess there is nothing to do but watch.

[Nor-LA-SD-guy]

Unfortunately just letting home prices drop to 2001 etc,, will not solve the economic problems for most or the Gov (although I think it will probably happen anyway in most locals) but it won’t help the economy.

Sure it will be great for the 15% or so with a lot of cash in the bank and no debt,

But that does not match the majority of people in the U.S.A. (or our Government) and will just make the unemployment problems worse not better (Gov needs high home prices to keep spending).

It is just going to be a long slow crawl because it’s political suicide to say hey why don’t we just inflate our way out of this mess.

Oh well I guess there is nothing to do but watch.

[Nor-LA-SD-guy]

Unfortunately just letting home prices drop to 2001 etc,, will not solve the economic problems for most or the Gov (although I think it will probably happen anyway in most locals) but it won’t help the economy.

Sure it will be great for the 15% or so with a lot of cash in the bank and no debt,

But that does not match the majority of people in the U.S.A. (or our Government) and will just make the unemployment problems worse not better (Gov needs high home prices to keep spending).

It is just going to be a long slow crawl because it’s political suicide to say hey why don’t we just inflate our way out of this mess.

Oh well I guess there is nothing to do but watch.

[Nor-LA-SD-guy]

Unfortunately just letting home prices drop to 2001 etc,, will not solve the economic problems for most or the Gov (although I think it will probably happen anyway in most locals) but it won’t help the economy.

Sure it will be great for the 15% or so with a lot of cash in the bank and no debt,

But that does not match the majority of people in the U.S.A. (or our Government) and will just make the unemployment problems worse not better (Gov needs high home prices to keep spending).

It is just going to be a long slow crawl because it’s political suicide to say hey why don’t we just inflate our way out of this mess.

Oh well I guess there is nothing to do but watch.

[Author]

Posts