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Old 10-07-2010, 04:02 PM
 
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everyone thinks in deflation their income stays the same and prices around them drop. to bad it dosnt work like that.. with every drop in price goes more jobs and more incomes and it just keeps spiraling down into another great depression.
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Old 10-07-2010, 04:14 PM
 
Location: Chino, CA
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Quote:
Originally Posted by mathjak107 View Post
everyone thinks in deflation their income stays the same and prices around them drop. to bad it dosnt work like that.. with every drop in price goes more jobs and more incomes and it just keeps spiraling down into another great depression.
if you don't need to work, and have fixed pensions you would be sitting on a gold mine with deflation... asset prices deflate, cost of products and services go down, more people would be out of work and thus cheaper to employ as slaves, while you sit on a pile of cash that becomes more valuable with zero effort of your own.

The catch22 is that you wouldn't want to spend any of it though since saving it would be worth more than spending it.

That my friend, IMO, is rent seeking. Deflation proponents are rent-seekers. By Increasing self wealth at the expense of production and all others.

I really don't understand how Manufacturing would Increase if the value of the dollar increases? Wouldn't it be the opposite as we'd have a harder time exporting things and an easier time importing things? Didn't MORE jobs get outsourced because of the current 2008/2009 downturn?

-c
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Old 10-07-2010, 05:03 PM
 
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except your fixed pension would probley fail. most pensions can only pay out because they themselves are invested. the deflated stock markets and defaults on their bonds would drive the pensions most likly into default.. and good luck counting on the pension guaranty fund to do much better...there is no good scenerio that comes from deflation for most of us.
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Old 10-07-2010, 05:14 PM
 
87,466 posts, read 84,913,413 times
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Quote:
Originally Posted by chuck22b View Post
if you don't need to work, and have fixed pensions you would be sitting on a gold mine with deflation... asset prices deflate, cost of products and services go down, more people would be out of work and thus cheaper to employ as slaves, while you sit on a pile of cash that becomes more valuable with zero effort of your own.

The catch22 is that you wouldn't want to spend any of it though since saving it would be worth more than spending it.

That my friend, IMO, is rent seeking. Deflation proponents are rent-seekers. By Increasing self wealth at the expense of production and all others.

I really don't understand how Manufacturing would Increase if the value of the dollar increases? Wouldn't it be the opposite as we'd have a harder time exporting things and an easier time importing things? Didn't MORE jobs get outsourced because of the current 2008/2009 downturn?

-c
a strong dollar may not be as helpful to some businesses,,

typically a strong dollar makes commodities cheaper as they are priced in dollars. that holds price increases on raw materials to manufacturers . since cheaper raw materials may allow price increases on that item to be put on hold that puts more available spending money in your pockets to buy more goods elsewhere.

strictly in theory.
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Old 10-07-2010, 05:41 PM
 
Location: Chino, CA
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Quote:
Originally Posted by mathjak107 View Post
a strong dollar may not be as helpful to some businesses,,

typically a strong dollar makes commodities cheaper as they are priced in dollars. that holds price increases on raw materials to manufacturers . since cheaper raw materials may allow price increases on that item to be put on hold that puts more available spending money in your pockets to buy more goods elsewhere.

strictly in theory.
ah... hmm... thanks mathjak...

just curious... doesn't this also hold for manufacturers in other countries that make products directed for the US?

ie, a strong US Dollar would make it cheaper for multi-nationals to produce overseas as commodities would be lower with a strong dollar?

So, in theory, as a US company that outsources production. I would want a strong dollar and a weak local currency. Ie, make my money in dollars (export to the US), buy commodities (raw materials) using dollars, pay for labor, facilities, and other non us denominated commodities with inflated local curreny (currency that isn't worth as much), and export/sell my products back to the US making US dollars.

Or simply, making money in US dollars and paying for labor and goods with inflated local currency = good business?

Thus, deflation and commodities denominated in dollars is actually great for those that export to the US?

Why China had a huge commodities buying spree last year when the dollar was stronger??

-chuck22b

Last edited by chuck22b; 10-07-2010 at 06:01 PM..
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Old 10-08-2010, 02:46 AM
 
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a strong dollar makes american products more expensive overseas making us a little less competitive. it takes more of their local currancy to meet our price .. they dont benefit from the drop in commodities as much because it its offset by taking more of their money to buy that commodity
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Old 10-08-2010, 08:57 AM
 
Location: San Diego California
6,797 posts, read 6,668,368 times
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Quote:
Originally Posted by mathjak107 View Post
everyone thinks in deflation their income stays the same and prices around them drop. to bad it dosnt work like that.. with every drop in price goes more jobs and more incomes and it just keeps spiraling down into another great depression.
You are making the assumption that deflation affects everything across the board which is clearly not the case. Deflation primarily affects assets which are out of line with market fundamentals. That is why we see deflation in real estate and not in consumables. Deflation follows the same laws of supply and demand as inflation. Real Estate values need to fall because supply is greater than demand. Equity prices need to fall because PE ratios are out of line with an economy in recession. Deflation is not painless by any means, but it is necessary when fundamentals are out of line. And at some point it corrects itself when investors can once again make a reasonable return. The pendulum can only swing so far in one direction, and then it must reverse.
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Old 10-08-2010, 09:45 AM
 
Location: 3rd Rock fts
753 posts, read 1,011,421 times
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Default Just another point of view

Quote:
Originally Posted by chuck22b
That my friend, IMO, is rent seeking. Deflation proponents are rent-seekers. By Increasing self wealth at the expense of production and all others.
Wow, that hurts. I’m not disagreeing with your quote but there are 2 sides to this issue. Abusive inflation makes me a rent-seeker, not deflation. I don’t want to play the rat-race game of costly, hurried profits @ the expense of what’s fair & reasonable (high inflation). IMO this is how the money gets transferred to the ‘rich’. The rich don’t take it, the ‘lower to middle class’ gives it to them by fueling this over exuberance! The lower to middle class are the ones paying for mortgage insurance, high interest rates etc… & go into debt.

I don’t plan on sitting on cash if we have major, corrective deflation. If & when deflation comes, I plan on using my newly valuable money to move forward/upward, not paddle up stream just to stay in place.

You beat me to it again jimhcom--nice post!;
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Old 10-08-2010, 11:38 AM
 
Location: Chino, CA
1,458 posts, read 3,068,460 times
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Quote:
Originally Posted by mathjak107 View Post
a strong dollar makes american products more expensive overseas making us a little less competitive. it takes more of their local currancy to meet our price .. they dont benefit from the drop in commodities as much because it its offset by taking more of their money to buy that commodity
If I'm an exporter in China, I make US dollars by selling products to the US.

Thus, I can benefit in two ways with a strong dollar and a weak local currency.

I can purchase cheaper commodities with the US dollars I make (since I make US dollars by selling products in the US or to US companies), and convert my US dollars into local currencies (favorable conversion rate) to pay my labor, facilities, and operating costs.

That is what I meant from my previous post. That it is favorable for a foreign exporter or a multi-national to outsource jobs/manufacturing with deflation AND commodities denominated in dollars.

Hope this makes sense?

-c

Last edited by chuck22b; 10-08-2010 at 11:59 AM..
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Old 10-08-2010, 11:44 AM
 
87,466 posts, read 84,913,413 times
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Quote:
Originally Posted by jimhcom View Post
You are making the assumption that deflation affects everything across the board which is clearly not the case. Deflation primarily affects assets which are out of line with market fundamentals. That is why we see deflation in real estate and not in consumables. Deflation follows the same laws of supply and demand as inflation. Real Estate values need to fall because supply is greater than demand. Equity prices need to fall because PE ratios are out of line with an economy in recession. Deflation is not painless by any means, but it is necessary when fundamentals are out of line. And at some point it corrects itself when investors can once again make a reasonable return. The pendulum can only swing so far in one direction, and then it must reverse.
deflation dosnt work ,plain and simple.... take it up with bernake, thats his expertise and greatest fear.....
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