U.S. CitiesCity-Data Forum Index
Covid-19 Information Page
Go Back   City-Data Forum > General Forums > Economics
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 01-12-2009, 03:03 PM
 
Location: Rockland County New York
2,984 posts, read 5,334,896 times
Reputation: 1295

Advertisements

When I go into any of the major stores I see deflation. If retailers want to sell their goods they better lower their prices or go under.
Reply With Quote Quick reply to this message

 
Old 01-12-2009, 06:25 PM
 
1,956 posts, read 4,860,572 times
Reputation: 1113
Quote:
Originally Posted by rubber_factory View Post
What do you mean that inflation will "wipe out debts" ? Can you elaborate some on that statement?
He's arguing that if hyperinflation will cause people's income to rise to such levels that they will easily be able to pay off the debts that were taken on when everything was cheaper (because the dollar bought more).

Say you have an annual income of $50K. You have $10K in credit card debt. High inflation sets in and causes the price of goods and services to sky rocket, which will eventually result in your paycheck skyrocketing because the system is flooded with cheapened money. Maybe now you will make $75K or $150K. Your credit card debt, however, still stays at $10K. You're in a much better position to pay it off.
Reply With Quote Quick reply to this message
 
Old 01-12-2009, 07:13 PM
 
3,722 posts, read 4,712,097 times
Reputation: 4751
Quote:
Originally Posted by Old Gringo View Post
For the average American, inflation is the MUCH better scenario. How would you handle it if your debt payments (home, car, credit cards) remained at their current levels, but your income dropped?
That's inflation.
Reply With Quote Quick reply to this message
 
Old 01-12-2009, 08:31 PM
 
3,460 posts, read 5,068,463 times
Reputation: 6677
Quote:
Originally Posted by trishguard View Post
That's inflation.
That's deflation, which is when there are too many goods for sale, and not enough dollars chasing them. In the case of deflation, people (and banks) like to hoard their money because they'll be able to buy more with it tomorrow. With less demand for goods and services, wages drop because there isn't enough work to go around.

Inflation is more dollars chasing fewer goods. People buy things as soon as they get money because prices are rising every day. When that happens, there is a boom in production, and workers can get more money because there aren't enough workers to go around.

Right now we're stuck in deflation which is making your mortgage and credit card payments more expensive relative to your wages. Eventually the pendulum will swing the other way, and we'll see inflation which will make your debts cheaper relative to your wages.

What a lot of people fear is that the government has put too much money into circulation, which could cause people to lose faith in the dollar as a currency. If that happens, we may experience hyperinflation, where people are desperate to get rid of cash which would mean that prices and wages could be 10X or even 100X higher, which would make your house and CC payments a drop in the proverbial bucket. That's good for the people who owe money, but it could completely destroy peoples life savings.


Back to the topic:
I think deflation is here for at least another year, but then the pendulum will swing back and we'll see some pretty serious inflation for a while. Its good to be in cash right now, and I'd be scared to tie up my money in anything longer than a 3-month CD.

Last edited by sterlinggirl; 01-12-2009 at 08:41 PM..
Reply With Quote Quick reply to this message
 
Old 01-12-2009, 08:57 PM
 
Location: Some place very cold
5,500 posts, read 20,489,922 times
Reputation: 4234
You can have BOTH -- deflation and inflation at the same time. Some things go up, some things go down. (Lots of folks don't get this -- they think it's got to be one or the other.)

Right now, we're seeing asset deflation and wage deflation. Values of houses, stocks, cars is going down. Wages are going down. Instead of cutting jobs, companies are cutting salaries, so they get more for less.

You may see hyperinflation of commodities due to flooding the system with money, so things like food, gas, clothes, start to go up. This may take a few years to happen yet. When it happens, you will not see a rise in wages. People will still be making low incomes, so they will be squeezed pretty hard.
Reply With Quote Quick reply to this message
 
Old 01-12-2009, 09:40 PM
 
3,722 posts, read 4,712,097 times
Reputation: 4751
Quote:
Originally Posted by sterlinggirl View Post
That's deflation, which is when there are too many goods for sale, and not enough dollars chasing them. In the case of deflation, people (and banks) like to hoard their money because they'll be able to buy more with it tomorrow. With less demand for goods and services, wages drop because there isn't enough work to go around.

Inflation is more dollars chasing fewer goods. People buy things as soon as they get money because prices are rising every day. When that happens, there is a boom in production, and workers can get more money because there aren't enough workers to go around.

Right now we're stuck in deflation which is making your mortgage and credit card payments more expensive relative to your wages. Eventually the pendulum will swing the other way, and we'll see inflation which will make your debts cheaper relative to your wages.

What a lot of people fear is that the government has put too much money into circulation, which could cause people to lose faith in the dollar as a currency. If that happens, we may experience hyperinflation, where people are desperate to get rid of cash which would mean that prices and wages could be 10X or even 100X higher, which would make your house and CC payments a drop in the proverbial bucket. That's good for the people who owe money, but it could completely destroy peoples life savings.


Back to the topic:
I think deflation is here for at least another year, but then the pendulum will swing back and we'll see some pretty serious inflation for a while. Its good to be in cash right now, and I'd be scared to tie up my money in anything longer than a 3-month CD.
Inflation decreases your purchasing power, which means your dollar is worth less.
Reply With Quote Quick reply to this message
 
Old 01-12-2009, 09:51 PM
 
48,509 posts, read 86,088,090 times
Reputation: 18105
Thgis is quite different from the 70's recession in that during that one we had double digit inflation and unemployment . Then the reaction of government when Reagan took over was to reduce government spending and lower taxes to stimulate the economy. Companies went under quickly in that recession. After wards what we saw was a entire generation never enter the stock markets again. I really think that part will happen again and people will be much more Conservative on investment for decades.That was also the start of a real boom in small businesses in this country as many took the chance after being layed-off to try their hand at it.Many companies instead of doing the work in-house decided to hire these companies to do contract work.For example in Houston the oil exploration business pretty much got wiped out after the embargo. Many got layed -off and then opened consulting companies. That is when the Saudis and others started their relationship with these companies. It was common for oil men who had worked in this country to work oversea after that and still is.I really look for this recession to cause similar changes. JMHO
Reply With Quote Quick reply to this message
 
Old 01-13-2009, 06:07 AM
 
20,322 posts, read 18,331,839 times
Reputation: 11289
You might have the two balance out and cancel out each other. People will stop spending, wrecking the consumer economy. On the other hand, the government will spend like a drunken sailor and money will become next to worthless. People will have no money to spend, the government will buy or make everything for them, or at elast what they want them to have. I think that's Bush's and Obama's master plan.
Reply With Quote Quick reply to this message
 
Old 01-13-2009, 07:55 AM
 
Location: Sacramento
13,819 posts, read 24,269,916 times
Reputation: 6340
Is it possible to have some deflation with severe federal deficits over the next couple of years? Would the increase in the money supply itself make this unlikely?
Reply With Quote Quick reply to this message
 
Old 01-13-2009, 08:42 AM
 
22,770 posts, read 26,992,285 times
Reputation: 14581
Quote:
Originally Posted by NewToCA View Post
Is it possible to have some deflation with severe federal deficits over the next couple of years? Would the increase in the money supply itself make this unlikely?
I am told that it is possible, because the velocity of money has slowed. When money isn't circulating quickly, you can print as much as you want without inflation. Once its circulation speeds up - something we have no control over - then the currency could lose a lot of its value.
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Economics
Similar Threads
Follow City-Data.com founder on our Forum or

All times are GMT -6.

© 2005-2020, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top