How to get the expectation of higher prices in a deflationary economy

[texdav]

Despite printing more dollars the dollar remains strong as other currencies depreciate. It all about FX trading on what maintains value. The Europeans are faced with what Japan has been for decades now; low growth combined with low inflation. Its really all about confidence like so many other things. Right now the FED and central banks are doing things that they have never done before. QE is even admitted by Berranke to work but economist do not know why. In some instance such as EU its not thought to work as well because of the structure of the union and authority difference in ECB . It lacks method to get the money where its most needed. because they lend thru banks which then deposit it with ECB. If nothing else it should be interesting what happens as FED raises rates and that includes the rest of the world effects.

[ContrarianEcon]

Originally Posted by Opin_Yunated

So what?

Why are you helping them instead of yourself?

(Hint: self-fulfilling prophecy)

The first step to success is to stop saying "I'm going to fail."

[ContrarianEcon]

Originally Posted by texdav

Despite printing more dollars the dollar remains strong as other currencies depreciate.

Someone said, best looking nag in the glue factory. Our economy is fundamentally sick, but others are relatively worse off.

Originally Posted by texdav

It all about FX trading on what maintains value. The Europeans are faced with what Japan has been for decades now; low growth combined with low inflation.

The EU has a problem. It has a fixed number of dollars. It can't do QE like we can.

Originally Posted by texdav

Its really all about confidence like so many other things.

Part of it si confidence, part of it is fundamentals. Total debt imposes a dead weight loss on an economy. Debt destruction fails the banks and that is very hard on employment. Inflation, true inflation tends to drive full employment. When you have too much total debt the central banks can't get small positive inflation. We've had a stock bubble and an oil bubble and both may pop this year.

Originally Posted by texdav

Right now the FED and central banks are doing things that they have never done before. QE is even admitted by Berranke to work but economist do not know why.

QR tends to drive the issuance of new debt. That gets money flowing.

Originally Posted by texdav

In some instance such as EU its not thought to work as well because of the structure of the union and authority difference in ECB . It lacks method to get the money where its most needed. because they lend thru banks which then deposit it with ECB. If nothing else it should be interesting what happens as FED raises rates and that includes the rest of the world effects.

The FED isn't going to raise rates. If they do you will see DOW 1k. It is a liquidity trap. The only way out is world wide inflation driven with the minimum wage law.

Deflation is coming and that is an economy killer.

Inflation is a far nicer animal to play with.

[ContrarianEcon]

Originally Posted by Jeo123

B) They don't go up, but employee wages do in the US and for US based companies, leading to higher manufacturing costs and Non-US companies dominate the global market. The US just winds up going the isolationist route(and we've seen that it doesn't work well for an economy to do that, which is why countries open up to the global market)

I've meant to respond to B) more fully.

We are the world's reserve currency and so everyone wants our debt (or should I say money but those are the same thing) so they world is obliged to play by our rules. If we put a capital gains tax penalty of 110% and a dividend tax penalty of 110% on stocks that show you own part of a company, that buys anything world wide made with labor at less than US minimum wage, employs anyone world wide at less than US minimum wage, or uses contract labor at less than US minimum wage, then we will oblige everyone to follow US minimum wage laws.

It will mean a level playing field world wide. There was a meeting of the G 20 group recently where they all agreed to do QE at the same time. QE all by itself isn't going to get us out of this mess. Higher bottom end wages world wide will.

[texdav]

Such events as this recession means changes in the economy from manufactures to consumers. As to deflation; its driven by lack of consumer demand and is likely changed for our lifetime; IMO.

[ContrarianEcon]

Originally Posted by texdav

Such events as this recession means changes in the economy from manufactures to consumers. As to deflation; its driven by lack of consumer demand and is likely changed for our lifetime; IMO.

I tend to agree with you. With total debt at 350% of GDP we aren't going to get growth any time soon. Personal debt is at 100% of GDP, not a lot of upside room to borrowing more money for more consumer spending. Corporate debt is well over 150% of GDP. Maxed out on debt. If you want more consumer spending then you need more low end wages. Plain and simple.

[ScoopLV]

And Wal-Mart at least is STARTING to get the picture. They just announced they're raising their minimum wage to $10/hour.

Walmart announces Q4 underlying1 EPS of $1.61 and additional strategic investments in people & e-commerce; Walmart U.S. comp sales increased 1.5 percent | Business Wire