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We can argue the positives and negatives but again we will note, another note that deflation doesn't equal a destruction of the country.
Not to delete a part of your post but I didn't really have much to add to it but I do here. The reason we had a serious economic downturn was because of the government creating bubbles for the simple sake of creating bubbles. I don't actually have a problem with some involvement to keep things on an even keel but that is not what the government is doing.
What we are doing now is extreme in that it is doing everything for the investment class and it is hurting every other class. I say this having investments. I have no choice as I can not do squat about it unless I quit my job. I've had nice gains but I still don't support what the government is doing. I would far prefer slow, steady not ready to pop at any moment investments.
This is taking the topic further and that's good also but to note, yes what the government is doing is stupid. There are many things which could have been done that would have been beneficial to a much larger class of citizens.
Enough deflation would mean destruction IMO. No way around that. More than small increments of deflation, as in reducing nominal inflation would not be a bad thing if the timing were right. The timing is not right today, where actually we need a small kicker.
Our economic downturn was caused by a private sector financial catastrophe. Gov't was involved through lack of oversight and regulation. I want Gov't to be there to support and at times help stimulate our general economy.
Right now equities have surged while fixed income languishes. This IMO is the sum of our economic times along with QE and low interest rates. Not all bad. Definitely good for me and the very rich.
Gov't stupidity I agree is quite common. The lack of middle class economic progress these past few decades attests to that fact.
Certainly some lack of trust in banks didn't help, but the lack of money caused it, and the lack of a central response to augment that lack of money accelerated it. Of course this is just my opinion and Uncle Miltie's assessment.
An even bigger problem is that the Fed can’t expand the money supply by cutting interest rates because a large deflation would require a negative nominal interest rate. But no bank is ever going to lend at a negative nominal rate, so the zero-bound problem, as economists call it, is a serious barrier to reversing a deflation through monetary policy alone.
The Fed Bank did loan very close to a negative nominal rate and the realized rate was below zero. Of course you nor I could get this rate and arguing nominal rate is a bit of a waste when the desired result is inflation.
Also, a deflation magnifies the real burden of debts.
Which is why governments want no part of it, not because it's going to destroy the country.
Most economists do not accept the do-nothing theory. They believe that government must play an active role in stimulating growth when the economy is suffering from a large, sustained deflation.
When the government took an unprecedented role to pump up the markets we had not in any way experienced any sustained deflation and I argue we wouldn't have with at best some targeted programs as opposed to all in for Wall Street.
Those who think the government should have done nothing risked turning the current downturn into another Great Depression. Thankfully, their advice was ignored.
I am not arguing that the government should have done nothing but what they did was wrong.
Enough oxygen will kill you. Enough of anything is bad. Japan had 20 years of deflation and they are still one of the better countries in the world.
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No way around that. More than small increments of deflation, as in reducing nominal inflation would not be a bad thing if the timing were right. The timing is not right today, where actually we need a small kicker.
We can argue that but IMO right after the bubbles popped was a good time. Yes, there would have been some short term pain but it wouldn't have dragged on for years and if you made it your policy to pop bubbles before they get created we get stability which is the absolutely best thing for the country and economy.
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Our economic downturn was caused by a private sector financial catastrophe. Gov't was involved through lack of oversight and regulation. I want Gov't to be there to support and at times help stimulate our general economy.
It was a quid pro quo. You provide the loans and we will look the other way how you do it and we will guarantee them.
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Right now equities have surged while fixed income languishes. This IMO is the sum of our economic times along with QE and low interest rates. Not all bad. Definitely good for me and the very rich.
Yes but the government has no business acting this way. They shouldn't be picking who gains and who doesn't.
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Gov't stupidity I agree is quite common. The lack of middle class economic progress these past few decades attests to that fact.
Middle and lower classes. I'm glad to see someone else acknowledge that.
Its the effect on those who invest that really matters. We see that in many European countries whose debt has gotten high and the ECB as said they will back the debt to keep rates down. Rates matter on any loan term projects for example. Now japan has had high debt for decades but its mostly owed to citizens. One can inflate but that leads to higher cost which leads to higher private sector cost and loss of competitiveness which means less money funding to government. What do companies do when they need to reduce the bottom line ;first they layoff then it often leads to more permanent job losses the reality is anything you do has consequences either now or later. Best to do what business does; make cuts and reduce debt to sustainable amounts. If we even went down to 2007 levels we could reduce it but keeping spending without private sector growth has a Greek ending.
Enough oxygen will kill you. Enough of anything is bad. Japan had 20 years of deflation and they are still one of the better countries in the world.
We can argue that but IMO right after the bubbles popped was a good time. Yes, there would have been some short term pain but it wouldn't have dragged on for years and if you made it your policy to pop bubbles before they get created we get stability which is the absolutely best thing for the country and economy.
It was a quid pro quo. You provide the loans and we will look the other way how you do it and we will guarantee them.
Yes but the government has no business acting this way. They shouldn't be picking who gains and who doesn't.
Middle and lower classes. I'm glad to see someone else acknowledge that.
I would believe that if we had persistent deflation, on the order of a few percent, the mirror of our inflation, for say a decade, that would mean that we are either fighting of an enormous national physical catastrophe, or we are planning for general economic isolationism for some reason. Because we can't deflate and also compete in the world unless the whole world follows our deflationary lead. Or we no longer want to compete.
Again, I want my Gov't to support our businesses and investments. And I think bubbles are inherent to this + our capitalist system. I plan for this and invest knowing this. Crashes make for some great buy low opportunities. Bubbles need to be understood and contended with. Snooze you lose! But many will benefit and gain if they have the proper stance at the proper times. e.g. many people made nice gains in RE before the crash.
We already take care of our poor here. It's the middle class I worry more about right now.
I would believe that if we had persistent deflation, on the order of a few percent, the mirror of our inflation, for say a decade, that would mean that we are either fighting of an enormous national physical catastrophe, or we are planning for general economic isolationism for some reason. Because we can't deflate and also compete in the world unless the whole world follows our deflationary lead. Or we no longer want to compete.
To be clear, I'm not arguing for long term deflation. I'm just arguing against the idea that some deflation is always bad and will destroy a country.
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Again, I want my Gov't to support our businesses and investments. And I think bubbles are inherent to this + our capitalist system. I plan for this and invest knowing this. Crashes make for some great buy low opportunities. Bubbles need to be understood and contended with. Snooze you lose! But many will benefit and gain if they have the proper stance at the proper times. e.g. many people made nice gains in RE before the crash.
The bubbles of the last twenty years are causing more and more to simply not trust the system. It may be good for a few in the short term but it's bad for the country in the long term and that's the problem with politicians, they only care about the short term, the next election.
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We already take care of our poor here. It's the middle class I worry more about right now.
Not when you are arguing for the instability of bubbles. If you want the middle class to thrive you do that with stability. Why are businesses so reluctant to hire? They know this monetary bubble is going to have to pop.
We haven't paid off a dime of the National Debt since before WWII.
(Well, I lied, there were a few years in the mid 1950s when the Natl Debt went down, from $274 billion to $270 billion, we paid off a whopping 1-1/2% of it before it shot back up the following year and has never come down again)
Funny, I remember one of you conservatives just the other day saying that we can't reduce the debt until we start spending less than we take in , but when your not Bush took over from President Clinton's surplus budget almost the first thing he did was to start cutting taxes to make sure, as Greenspan advised, that we wouldn't pay off the debt.
To be clear, I'm not arguing for long term deflation. I'm just arguing against the idea that some deflation is always bad and will destroy a country.
The bubbles of the last twenty years are causing more and more to simply not trust the system. It may be good for a few in the short term but it's bad for the country in the long term and that's the problem with politicians, they only care about the short term, the next election.
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Originally Posted by pknopp
I am not arguing that the government should have done nothing but what they did was wrong.
Your argument is that you are "more right" than global economists in every developed country. There is no point in entertaining the insanity of your posts. You just have no idea what you are talking about. Kick and scream all you want. Write your Congressmen. They will agree with me. I'm right and you are wrong. Inflation is better than deflation. No government on this planet will entertain the thought of deflation because their economists understand basic fundamentals of economics. You clearly do not.
Trust is irrelevant. We do not entertain arguments based on conspiracy theories. Come correct with evidence if you are going to anoint yourself as all-knowing for our nation's fiscal policy.
Enough oxygen will kill you. Enough of anything is bad. Japan had 20 years of deflation and they are still one of the better countries in the world.
Just Stop.
Japan has not had deflation. Japan has artificially stimulated its way out of deflation every year through dozens of bailouts and stimulus. Japan is an example of a government doing everything in its power to prevent deflation.
I'm going to repeat one last time. You are 100% wrong in this discussion. Deflation is so dangerous that governments will always choose inflation.
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