Posted on 06/22/2009 6:28:41 PM PDT by sickoflibs
The big threat is that the rest of the world figures out a way to live without our consumption, and No they wont be dependent on Obama green jobs technology, they will just buy cheap (to them, not us) dirty carbon energy like oil instead.
There is an epidemic of bankruptcies: Circuit City, Sharper Image, Goody’s, Gottschalk’s, Comp USA, Levitz Furniture, Chrysler, GM
They all deserved to die.
The one really big bankruptcy that isn’t mentioned here is the federal gov’t.
Lousy advice in that article! OK, selling your real-estate would have been good advice in 2005, but today it's already too late.
We've still got time to sell some stocks, though. Get liquid!
This is a liquidity crisis, inasmuchas having global over-production means a reduced ability+desire to lend and a heightened awareness of the value of having cash-on-hand instead of wealth tied up in physical assets.
Wrong. The Great Depression *was* deflationary because home prices and salaries declined in spite of what FDR did.
Nor is inflation easy to create. Japan has been trying each year since 1989 to create inflation. They’ve borrowed and spent more than us.
And Japan has 15% annual deflation right now.
But the world has too many houses. Too many factories. Too many shopping malls. Too many cargo ships. Too many airlines.
Where there are surplusses, expect falling prices. Like salaries. See, we have too many jobs worldwide compared to demand.
I would also tend to (like to tend to?) think we would see an initial deflationary cycle first. If that winds up being the case at all, it is highly likely to be temporary for a number of reasons.
Above are only a few reasons. Being that Southack is probably bored from reading all of my mini-novels to him, so I won't elaborate any further. Suffice to say, if we see deflation at all, it's likely to be short lived.
Right now business and industry is being savaged and has been for the past year or two, but generally speaking, can any of us really say we've seen deflation? It's great time to buy a house, and a somewhat okay time to buy a car, but on a macro level, prices are not coming down across the board - in fact they're going up. We should be seeing deflation now if the rule that says commercial and industrial slowdown = deflation were hard and fast.
I know from corresponding with you (Southack) that the following is not what you contend, some will say that inflation only happens if the economy heats up, and they will also say that the converse is true, the economy slowing down will always bring deflation.
Logically and historically speaking, neither is necessarily true. An overheated economy is only one of many factors that may cause inflation. Inflation can happen in a lousy economic environment. Respectively, a hobbled economy doesn't necessarily cause deflation. I point to Zimbabwe or the Wiemer Republic as only two examples.
did you read my post? i fail to see how any of those three sentences were false. maybe you read too much into it. a depression will feature both deflation and inflation. deflation is the main cure to the problem, while inflation is the government response. ill bet you a hundred bucks that by the time this is over, we will have significant inflation (or dollar devaluation) compared to where we are now.
12 what? Times? Percent? This sentence is gobbledygook.
All of the Baby Boomers want to cash out of their McMansions and move into cheap little retirement condos. As they discover that their giants homes won’t sell, they will lower their prices more and more.
In the meantime, the slowing economy means fewer jobs. That leaves less new money available for consumer buying, and also means that fewer and fewer people can get loans.
The above combine to destroy banks and commercial real-estate as loan volume dries up and fewer people shop at malls.
This is wealth destruction at an unprecedented pace.
It is deflationary to an extreme.
To pretend that somehow the government can raise salaries, raise employment, save commercial real-estate, and make millions of McMansions go up in price (i.e. inflation) is to ignore the death spiral that the current global economy is trapped inside.
Japan was using the pre-global economy model, where a country could simply increased money supply and cause inflation in its respective society. However, in this global environment, the rest of the world didn't could care less if Japan needs inflation. Japan, being an exporting nation, can't get more for their cars, electronics etc. than the rest of the world is willing to pay.
If the were trying to create inflation, they were an island unto themselves in doing so.
Now however, EVERYBODY wants inflation. Europe and America needs it for many reasons, not the least of which being to bring the nominal value of depleted assets up, and the make the real burden of debt less painful. China and Asia want inflation. International bankers want inflation. Politicos want inflation because they fear deflation more.
All the right people want inflation, so it will happen.
***An overheated economy is only one of many factors that may cause inflation***
I hate the term “over heated economy”. They say this is inflationary but at the same time don’t look at the continuous influx of money created ex nihilo (from nothing) by the banking system. The economy isn’t growing; it’s being malinvested and of course it becomes inflationary when the structure of production is distorted and the relative drop in the interest rate signals that there is more capital available for investment than actually exists. Perpetual inflation isn’t necessary for economic growth, and in fact it necessarily sets in motion the eventual bust.
***Respectively, a hobbled economy doesn’t necessarily cause deflation.***
And deflation doesn’t necessarily cause a hobbled economy.
As for what’s going to happen in our current economy, I believe the fed and the feds are dead set against deflation and will do whatever it takes to keep prices rising. There are many deflationary factors to be sure, but the central planners are trying very hard to prevent the necessary corrections in the economy from taking place, and thus trying very hard to cause inflation.
i said nothing about salaries, employment or real estate. The government will inflate or die trying.
Bingo.
ALL of the central planners (international bankers, Western governments) want inflation. They need it to sustain themselves. Therefore it will happen. This isn't "Japan."
It's happening already. Despite the fact that the few who are qualified to borrow money won't (and the rest can't), interest rates are going up. Few are lending, few are borrowing. Few want to "buy" money, yet the price of "buying" money (i.e. interest rates) is going up.
That's deflationary, not inflationary. Higher interest rates and a higher cost to borrow discourages borrowing and discourage spending.
Deflation.
I thought after I posted that, that my thinking would seems backwards.
What I'm conteding is that higher interest rates are (likely) a bellwether of inflation or coming inflation. Think the Carter years. Interest rates went through the roof yet prices were sky-high.
I went to Toy-R-us today and it cost me $40 for a puzzle, a DVD and 2 boxes of crayons - all made in China.
Ask yourself, despite high unemployment, crummy retail sales, low money velocity and failing businesses, in your neck of the woods, are you paying more for everything or less?
See what I mean?
Higher interest rates, because they are deflationary, can be used by central banks to fight inflation.
Interest rates have been lowered, however, worldwide because central banks are fighting deflation. Poorly.
The world is still stuck in a deflationary death spiral.
30 years ago a single video disk would have cost you $150.
Deflation.
High end shoes and suits are half off. Deflation.
Computers and watches are cheaper. Deflation.
Cell phones and phone service (Vonage!) is cheaper. Deflation.
Satellite TV is cheaper than cable. Deflation.
High speed internet is cheaper today than dial-up was in 1990. Deflation.
Homes are cheaper today. Rents are lower today. Salaries are lower today.
Deflation.
Wal-Mart sold $140 Billion worth of groceries in the past 12 months by being cheaper than grocery stores.
Deflation. Limes are 15 for $1. Ears of corn are just $0.27 retail.
Deflation.
You can download new release movies for $5, or rent all of the movies that you want to see each month (Netflix!) for $10.
Deflation.
Cars are cheaper, aircraft are cheaper, and boats are cheaper today than in 2007. Used and new.
Deflation.
Prescription glasses were $300 to $800 last year.
This year you can get them online from Zinnioptical.com for $30 to $80.
Deflation. Even airline tickets are cheaper this year. Deflation.
But Southack, if that's true, why then is the price of everything (save for a few anomalies) going up? The price of money, wine, toys, food, energy, commodities - nearly everything.
Am I living in some alternate universe, or are you seeing this where you live also?
Nope. Wine is cheaper. Two Buck Chuck. Toys are cheaper.
A higher price for money is also *deflationary*.
Energy was not in surplus. That's like having the lambs blood on your door during Passover. You get skipped.
Commodities are a mixed bag. Up from their lows, but down from their highs last year.
...and none of that is as significant as the major items like homes and salaries. Both are down. Deflationary.
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