Comments on: No Escaping Deflation’s Fatal Drag on Economy

By: ben

ben — Mon, 07 Jun 2010 08:12:13 +0000

And that ease, ease , ease is leading to the hyper-inflation. An economy can lumber along for decades under the yoke of deflation…but once that inflation genie is let out of the bottle, the currency goes down the toilet in the blink of an eye.

By: mudturtle

mudturtle — Fri, 04 Jun 2010 04:04:47 +0000

OK Rick, what about what is happening to the few slobs like me that saw this coming for a decade. I have no debt and no debt in my business. There is no reward for doing the right thing.
If I was a bankster or FED maggot I would have gotten any number of bailouts for doing the wrong thing.
Why should anyone in the middle class that is in my position do anything other than go into maximum protection of what I have saved?
The utter incompetents of OSHA showed up in my place to investigate claims of unsafe conditions that was filed by a hopeless drunk woman that wanted to punish her son that was an employee. OSHA couldn’t come up with any violations other than that we allow “uncertified” folks to drive a forklift truck.
The fine was 1250, but was marked down to 450 if paid immediately. How long do they stay with the small extortions? The next time will be for bigger loot. The deflation of tax receipts will only encourage this theft. Ignorance of their regulation is no excuse, so they will be back.

By: TC

TC — Fri, 04 Jun 2010 02:18:26 +0000

And the CPI? Please…. We could have hyperinflation and the CPI would not show a figure above 7%.

By: TC

TC — Fri, 04 Jun 2010 02:16:11 +0000

“and one much bigger one that you did not: stagnant real incomes. ”

I actually did list that one. The average worker was making in the 20’s in 1991. Of course when it cost a buck a gallon for gas and the Dow was 3000… 20 some thousand was a lot of dough before all the inflation set in. Average rent was only $400 a month!

I will give you that since 2007 there has been some deflation…. heck maybe you will be right and it will be a deflationary depression as well. My point was only that the deflationists have been the ones waiting and waiting… Maybe their day has come?

By: Chris T.

Chris T. — Fri, 04 Jun 2010 00:17:55 +0000

Tend to be a fence sitter, as there are (taken in isolation) good arguments on both sides.
Ultimately, though, who cares?
The only thing that should really matter, is what will happen to the ultimate hard-money in both cases.

Can a supposed commodity like gold, decouple from every others’ depreciation (relative to cash) or not?

Here, Antal Fekete has provided some valuable insights., as does Mises’ quote above.
There will not be a voluntary abandonment of anything by anyone, as the short term cost to those deciding such an approach is always greater than the long term benefit (accruing not to them).

Thus, Mises ultimate collapse. Then he who has gold has more than most, and it did not “deflate”.

The much-made analogy to the Reichsmark circa 1923 is wrong insofar as one really should focus on the Reichsmark at 12:10 AM on 5/9/1945.

“an outright hyperinflation will be needed to wipe hundreds of trillions of dollars’ worth of unpayable debt from the world’s books.”

They will simply be repaid in the promised coin, one made of pulp, fiber, and ink, or, more up-to-date, little digits in the electronic ether.

Finally, if in a fiat system, debt=money, then with the formers disappearance, so should the latter.

By: Benjamin

Benjamin — Thu, 03 Jun 2010 22:00:04 +0000

Now that was a read! I can’t say I understand everything in that article, but the picture is clear (and grim indeed).

I also agree that, as Mr Ackerman said, that hyperinflation in real estate is not going to happen, though I never considered that lease-like terms would be drawn. I always figured they would have to just take a bath on most mortgages, and just let it be a lesson learned to not play with central banking.

By: Benjamin

Benjamin — Thu, 03 Jun 2010 21:55:05 +0000

Thanks for answering, Rich, as I wasn’t quite sure what Steve was asking. But where in the Constitution does it say “an ounce of silver per dollar, and an ounce of gold per $20.”

The only thing I’ve ever seen concerning gold and silver is in article I section 8 and article I section 10. I was under the impression that the weights could change, if Congress saw fit to.

By: Steve

Steve — Thu, 03 Jun 2010 21:24:09 +0000

Good,
F.D.R. created the gold dollar territorially in 1933, I’m impressed Rich. Dollars, and Eagles, (silver specie Money) and F.D.R. criminality. The Gold Bullion Act of 1985 was supposed to return Lawful Money to the People according to the Senate Record. Reagan was shot, the title changed, and here we are. Call the Mint – specie (silver specie) Legal Tender is still minted for the several States, but; where are they, those several States ?

By: Max Power

Max Power — Thu, 03 Jun 2010 21:21:40 +0000

“those who fervently believe, as nearly all economists do, that Government has all the answers”

Unfortunately, governments do not have all the answers as evidenced by the mess this world is in, even though the answers many time are fairly apparent – answers that the big herd of clueless folks do not want to hear. Governments essentially reflect the big herd they are a part of. Look at Europe. The (big herd of) Germans do not want to bail out the Greeks. Okay, so German and French banks will take the hit then. Who winds up being the real loser here? Greece? Nope. The Germans. Worse yet, Greece would then be forced to leave the Euro and devalue its currency. Then how many BMWs will the Germans sell to the Greeks??

And on an on…. this type of problem is being played out many times over throughout the world in one form or another…

So who should solve this type of problem? Business? How does one get millions of businesses around the world to agree to a common good and solve such issues? Wasn’t it business that was behind the repeal of the Glass-Steagall Act, which opened the door to the financial abuses that followed and the major problems being experienced now?

By: Max Power

Max Power — Thu, 03 Jun 2010 20:50:48 +0000

“So where is all that M1 going?”

This is a very good question that I have asked myself many times over. As to the answer, I do not know. I can only speculate without having access to the inside numbers. My guess is that a number of things have happened to it – from being socked away in a mattress to sitting in a savings account to just circulating in the system right now. But probably the biggest factor here is the reduced velocity of money. When folks are fearful, things slow down. Fewer purchases, fewer loans, fewer everything. Those that are unemployed are not spending and those that are employed have reduced their spending. And more spending is needed to get things moving again, not less. The only way to have 100% employment is to consume 100% of output. If folks save 5%, the economy shrinks by 5% unless government compensates by adding more money to the system. The trouble is, not only is the US government faced with having to compensate for the change in spending habits of its citizens, it is also being forced to compensate for others such as China, where folks save way too much.