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Deflation would make things better for only one rather small group of people - those who have no debt and who have substantial cash reserves. The actual value of their cash would grow.
By contrast, it would make things worse for everyone who owes money, as paying off debt would become more difficult as wages drop along with prices.
The FED has a very simple job to do. To lead the economy out of its cyclical deflation by lowering interest rates; and to lead the economy out of its cyclical inflation by raising rates. Day followed by Nigh, remember? The first part of this job the FED almost always does well; the second part it never does well.
The reality is that Nature, and everything in Nature, breathes, expands and contracts. We are experiencing a classic denial of reality, based somewhat on good intentions. We need to follow Nature. We need BOTH expansion of spending AND the end of that expansion, rest, conservation of energy that is the basis of the rest season, and saving to replace spending as the driver of this dual cycle.
The problem is that we are one-sided. We want only the pleasure side of life, the bright sunny side, the youth. But this is childish. Of course the child wants only candy. But are his parents supposed to give him only candy. If they do he never grows up; or he grows up stupid and fat with bad teeth. Where is the discipline here? The FED is supposed to be imposing discipline on the child. We expand, we get rich, we spend money, we are happy, the sun is shining. But then the day gets old, and the party has to end. The FED is unwilling to say that the party is ending. Lowering interest rates and flooding money into the economy to keep cost of carry debt low is a FED (a parent) who refuses to discipline his children. We become spoiled; decadent; eventually we will be overthrown as a nation because we have leaders who are afraid to give us bad news, that reality is not quite what we want. We have gutless parents who are willing to let the entire system we have created go bankrupt rather than to have to play the role of the bad guy who says "enough is enough". "We have to face reality."
We will get a strong Father figure who will put his foot down. This will bring in suffering, deflation and austerity. Who is going to be our next Paul Volcker? He had to raise interest rates up to 20%, this time we will need to raise it even higher, 30% maybe to destroy all that bad debt that we are protecting with zero interest rates.
No it's not, but it's necessary. Deflation cycles are needed as much as inflation cycles are needed. Deflation cycles are needed in order to dry out the world from the flood of cheap and easy money. Deflation brings prices back down to salaries; deflation lessens the gap between the rich and the poor; and deflation shifts the national obsession away from speculators and the fast buck and the enrichment of the 1% and back toward the mass of the citizens (99%), this through higher interest rates and safe returns on the growth of savings, which savings then become the fuel for the next organic growth of investment/business cycle.
No it's not, but it's necessary. Deflation cycles are needed as much as inflation cycles are needed. Deflation cycles are needed in order to dry out the world from the flood of cheap and easy money. Deflation brings prices back down to salaries; deflation lessens the gap between the rich and the poor; and deflation shifts the national obsession away from speculators and the fast buck and the enrichment of the 1% and back toward the mass of the citizens (99%), this through higher interest rates and safe returns on the growth of savings, which savings then become the fuel for the next organic growth of investment/business cycle.
Incomes stay the same in deflationary cycles? That's interesting. What's your doctorate in?
What we do not need is artificial deflation by FED disrupting the economy has the norm. FED lowering rates rates has consequences like anything else. The markets and the economy need the markets to flow on their own not by tampering by anyone. That is why the rates maybe low but the markets and economy are volatile and the markets are working by word not fundamentals. Even the man o the street is holding back because they can't eve guess by looking at fundamentals
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