Higher Inflation OR Higher Unemployment Which do you prefer? (buy, taxes, money)

[chuck22b]

Hi Guys,
Basically it boils down to this.

Higher Inflation

Or

Higher Unemployment


Either way,
Tax payers are going to pay for it. Higher unemployment means there will be more people putting a drain on unemployment and therefore those still working will still have to pay... "higher" taxes. With higher inflation, we'll all still get to work... but our buying power will be reduced.

Higher unemployment also comes with the destruction/contraction of businesses and business activity (startups, new technology). Higher inflation comes with lower consumption and likewise a potential for businesses to close. BUT, it's the right type of businesses to close (ie, consumption based businesses - retail, luxury, entertainment).

Anyway we slice it... America loses. Which do you prefer? And which gives us a better chance of a turn around?

-chuck22b

[DAP443]

None, of course. Unemployment will cause more damage to the economy, in the long run. So, I choose inflation, I guess.

[mojo_1979]

Originally Posted by chuck22b

Hi Guys,
Basically it boils down to this.

Higher Inflation

Or

Higher Unemployment


Either way,
Tax payers are going to pay for it. Higher unemployment means there will be more people putting a drain on unemployment and therefore those still working will still have to pay... "higher" taxes. With higher inflation, we'll all still get to work... but our buying power will be reduced.

Higher unemployment also comes with the destruction/contraction of businesses and business activity (startups, new technology). Higher inflation comes with lower consumption and likewise a potential for businesses to close. BUT, it's the right type of businesses to close (ie, consumption based businesses - retail, luxury, entertainment).

Anyway we slice it... America loses. Which do you prefer? And which gives us a better chance of a turn around?

-chuck22b

There is no choice. We're going to be seeing both in the very near future. No wall street bailout is going to change this.

[chuck22b]

I'm in the camp that thinks we're in a deflationary environment. The demand destruction as a result of business and household contraction would lower the price of almost all goods and services.

Medical maybe not (since the demand is increasing faster than demand)... but food, gas, and even utilities I can see it go down in price. Less use (reduced demand)... but increasing availability/supply (drilling, opec maintaining production, alt. energy coming online, efficiency increases in farming...etc.). China and the global economy is also slowing. So the price mechanisms of supply and demand looks deflationary.

IF, there was a bailout... and the government ops to print more money instead of raising taxes... then we'd have an inflationary environment.

-chuck22b

[mojo_1979]

The worldwide demand for food and energy is increasing at rates that we've never seen before. Combine this with the declining US Dollar and you're looking at price increases.

You have to look at this from a world-wide view. Step back and focus on the world and not just America and it is easy to see why food and energy prices probably won't be declining anytime soon. Hopefully I'm wrong though.

[chuck22b]

Originally Posted by mojo_1979

The worldwide demand for food and energy is increasing at rates that we've never seen before. Combine this with the declining US Dollar and you're looking at price increases.

You have to look at this from a world-wide view. Step back and focus on the world and not just America and it is easy to see why food and energy prices probably won't be declining anytime soon. Hopefully I'm wrong though.

The global economy is slowing. It's not just a US issue. Europe is doing just as bad as us... the BRIC economies that rely on OIL and US exports are hurting too. China and other countries that have reserves and savings should fair a little better... but in the most part... there is a higher amount of demand destruction than demand creation.

Just look at capacity utilization in factories around the world.

-chuck22b

[mojo_1979]

Originally Posted by chuck22b

The global economy is slowing. It's not just a US issue.

How does a slowing global economy result in less demand for food and energy to serve the ever-growing world population?

[Lulu101]

need a 3rd choice: stagflation

[mojo_1979]

Originally Posted by Lulu101

need a 3rd choice: stagflation

You've got my vote!

[sergeyn]

Definitely inflation.

I think that the main problem with America is that people here can easily buy from abroad much more than we send abroad. They give us real stuff while we give them paper or promises of more paper. That's how I see this whole crisis at its core.

This situation obviously can't last but for the sake of compassion, it is better to let people's money devalue so the amount of things they can buy approaches the amount of useful things America outputs.

I am more than willing to face $7 gasoline, $1,000 airfares or $1,500 PC if we can avoid tens of millions people losing their jobs and descending into grinding poverty. Mass extreme hardship is about the worst thing that can happen.