[napscoordinator]

Is it true that deflation is worse? They were saying this on TV but to me deflation is the prices going down on things. I would imagine that would help average americans pretty good right now.

[ari-freedom]

deflation can be just as bad as inflation. We need a stable $.

[RebelViking]

I do not think deflation is worse, and I do not even think it would be possible to have runaway deflation in our economy. I feel that right now deflation would be a good thing for our country, but I’m only a rightwinger that went to Exeter and Harvard so what do I know.

Deflation relating to the credit markets is what the typical consensus economist fears, but as we see now, we can also lose liquidity while having inflation, which is a worse situation to be in. Short term consumer prices are not a good measure to use when judging deflation, so I can see how some TV retards might use that as a scare right now, but watch the inflation, and watch the Demon-rats take a dump on the value of the dollar. It’s probably a good time to take your dollars and make them euros.

[lmr]

Deflation is worse than inflation.

Yes, prices go down, but prices for EVERYTHING go down including the 'price' someone is willing to pay for your labor, your salary.

Basically, it doesn't matter if gas goes down to, say, $1.50. If high paying jobs are eliminated like those in the auto industry because demand for autos has fallen, then many of those people are forced to take lower paying jobs when their unemployment runs out. If Unemployment is high, labor is cheap. You have no choice but to work for less money. If you were making $2000 per week and gas was $4.00 a gallon before deflation and now you can only make $400 per week, that $1.50 gas actually costs more than the $4.00 gas did earlier.

With falling prices everywhere, some industries will find it more expensive to finish goods that are on the production line than what they can get for those goods once they are completed/built. During the Depression, farmers ran into this problem. There were many that plowed their crops under, dumped their milk out on to the ground and allowed their fruit trees to drop the fruit, only to rot.

Deflation is the worst possible scenario. I do fear that is what we are experiencing now.

Personally, our response should be to get out of debt and liquidate any hard assets that we don't need. Put this money in our mattress and buy our food and toilet paper one can and one roll at a time.

What's coming isn't good and no one, not even the 'Messiah' can help us.

[fhayek]

Deflation is far worse. If the price of houses is falling, what bank is going lend you money to buy it? Banks are in the crapper now, deflation would be devastating.

[Jotmo]

Deflated prices mean that companies cannot make money on selling their goods and services the paid for at higher prices. This will lead to massive layoffs since labor is one of the few costs a company can control.

More people out of work means less people to spend money, and demand for all products goes done. Demand goes down, prices all goods and services fall again.

Rinse, repeat.

This happens until sometime in the future when there are so few products being made, that the supply equalizes with the demand once again.

By this time the economy has retraced significantly, we have massive unemployment, tax revenues are in the toilet, yet government continues to spend.

We're in one hell of a mess.

We need to let the economy correct itself now when it will be less painful, rather than continue to prop it up with government debt until it's unsustainable and the entire house of cards come crashing down.

Think great depression x 10.

[sanchmo]

The primary risk of deflation is that fewer people want to buy (because they expect prices to be lower in the future), fewer people want to borrow (because it’s cheaper to postpone purchases that it is to buy at today’s prices & interest rates), fewer people want to produce (because demand is dropping due to the previous 2 factors), fewer people want to hire (because labor costs stay relatively high related to dropping demand & dropping selling prices), and fewer people want to lend (because defaults and bankruptcies increase).

The policy risk of deflation is a regulatory risk. For one, governments tend to do stupid things that increase the problem. For another, the most powerful tool for easing / stopping deflation is reflation (injecting just enough money into the economy in whatever way possible), but there is a lag in info available to the govt (CPI & PPI data are always 30 days old on average, GDP data is always 60 days old on average) and a lag on policy impact (Fed interest rate changes take about 3-12 months to really start to have an effect), which means that policy will typically be too little or too much. That means that the Govt would have to spend trillions of newly-created dollars to get an uncertain result.

Overall, it means that the main risk with deflation is a protracted slump, or a sudden switch to uncontrolled inflation.

[Sunnyflorida]

“Is it true that deflation is worse? “

Worth every dime:

http://www.amazon.com/Basic-Economics-3rd-Ed-Economy/dp/0465002609/ref=pd_bbs_sr_2?ie=UTF8&s=books&qid=1227562344&sr=8-2

[plain talk]

Deflation at high levels can be bad when it sets in. People wait to spend because they believe prices will continue to decline. downward spiral occurs. Again this is what happens at higher levels of deflation.