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As others have said, the culprit is demand-destruction. If people feel that they can't afford stuff, and credit is either inaccessible or no longer socially regarded as "equivalent" to cash, then people will buy less stuff. If they can afford it, but choose not to, placing instead priority on savings or on reducing their extant debt, again less stuff will be bought. If there is less demand for stuff, the price of stuff will increase at most at a muted rate.
Vitriol aside, an important effect of globalization and emergence of market-economies in formerly centrally planned (or agrarian, or quasi-feudal) regimes, is disinflation (not deflation, but reduction of positive inflation rate). This will presumably continue until the world absorbs new workers and equilibrates, and those new workers start demanding a higher standard of living (meaning, wanting more stuff).
As others have said, the culprit is demand-destruction. If people feel that they can't afford stuff, and credit is either inaccessible or no longer socially regarded as "equivalent" to cash, then people will buy less stuff. If they can afford it, but choose not to, placing instead priority on savings or on reducing their extant debt, again less stuff will be bought. If there is less demand for stuff, the price of stuff will increase at most at a muted rate.
Vitriol aside, an important effect of globalization and emergence of market-economies in formerly centrally planned (or agrarian, or quasi-feudal) regimes, is disinflation (not deflation, but reduction of positive inflation rate). This will presumably continue until the world absorbs new workers and equilibrates, and those new workers start demanding a higher standard of living (meaning, wanting more stuff).
As China is bound to do this next generation or so..
An increase in money supply alone does not cause inflation. Inflation is caused when too much money is chasing too few goods. Until consumers & businesses actually SPEND the money, there won't be inflation. The Fed stimulus is actually offsetting the decline in money supply that would be happening due to foreclosures and paying down debt that has been happening since 2008.
A better measure of impending inflation is M1 money velocity. Right now it is very low, therefore there won't be price inflation for the foreseeable future
And please, everyone stop using the term "Printing money". It shows ignorance. Money cannot be printed; only currency can.
An increase in money supply alone does not cause inflation. Inflation is caused when too much money is chasing too few goods. Until consumers & businesses actually SPEND the money, there won't be inflation. The Fed stimulus is actually offsetting the decline in money supply that would be happening due to foreclosures and paying down debt that has been happening since 2008.
A better measure of impending inflation is M1 money velocity. Right now it is very low, therefore there won't be price inflation for the foreseeable future
And please, everyone stop using the term "Printing money". It shows ignorance. Money cannot be printed; only currency can.
Some consider Treasuries money-like and could be printed if you wanted some cute wall decoration.
An increase in money supply alone does not cause inflation. Inflation is caused when too much money is chasing too few goods. Until consumers & businesses actually SPEND the money, there won't be inflation. The Fed stimulus is actually offsetting the decline in money supply that would be happening due to foreclosures and paying down debt that has been happening since 2008.
A better measure of impending inflation is M1 money velocity. Right now it is very low, therefore there won't be price inflation for the foreseeable future
And please, everyone stop using the term "Printing money". It shows ignorance. Money cannot be printed; only currency can.
I believe that American consumerism, while substantial compared to other parts of the world, is over stated. The housing bubble was not a spending binge psychologically speaking. It was in the aggregate reality, since housing nets to a house, not industrial capital equipment. However its exchange value that is the relevant factor for the individual. Now that housing is no longer the saving mirage , the saving now represents much more real abstinence and lack of consumption. . That is to say the US appetite to save is vastly understated. Housing is no longer there to fool us into consumption as an "investment".
No offense intended, but its a little pedantic to insist on spitting hairs between currency and money unless its specifically relevant to the point. Its also not even correct. Currency is the form of money that typically circulates , as in coins and dollar bills. On metal standards that includes PM because silver was the most common currency at one point.
Because the economy was already deflationary before they started printing money, so equilibrium was maintained.
Largely true. So much money was destroyed during the economic collapse the Fed had to print some to replace it. And there is tremendous slack in the US economy. It's like pulling on a 1,000 mile long rope.
your cost of living may be be higher but the cpi which is merely a price change index is pretty much as correct as a complex index like it can be.
people confuse their personal cost of living index with a price change index like the cpi's and they are not the same thing.
the cpi would be a component in your personal cost of living index but only one of a few components that make it up.
my sister refinanced and with the money she saveds he is actually spending less each month overall than even 3 years ago .
i rent so my costs are higher than 3 years ago.
there are to many personal variables between us for only a price change index to mean much. just because it works out differently for you does not mean the index is lying you are trying to measure something different which is your personal cost of living.
your own index would be based on the goods and services you actually buy and the price change the cpi shows on them x the number of times you buy it x a quality factor.
if i buy gap jeans and you buy cheap kmart jeans there will be a difference in the price increases as higher end stuff usually goes up more but you get something in return which is higher quality.
your own cost of living may be very different from just a summary of the entire cpi which includes stuff you rarely or ever use.
Last edited by mathjak107; 10-12-2013 at 04:34 AM..
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