Comparing it to other currencies is not a way to determine purchasing power, especially when most central banks are inflating.

7/30/2010 12:49:44 AM

What do you price stuff with? When you see those numbers go across a stock ticker, what do you think they are?

BTW we're talking about deflation, not a rise in purchasing power.

But just to put this to rest
http://www.rateinflation.com/inflation-rate/japan-historical-inflation-rate.php
http://www.rateinflation.com/consumer-price-index/japan-historical-cpi.php

Check the past ten years

[Edited on July 30, 2010 at 1:01 AM. Reason : [b]/b]]

7/30/2010 12:56:46 AM

Laurie Santos: A monkey economy as irrational as ours

Quote :

"Laurie Santos looks for the roots of human irrationality by watching the way our primate relatives make decisions. A clever series of experiments in "monkeynomics" shows that some of the silly choices we make, monkeys make too."

7/30/2010 7:17:00 AM

^^You're confusing stock prices with actual prices. Yeah, Japanese stocks are down from their highs, which sucks for investors, but it has nothing to do with the standard of living or how much a loaf of bread costs. Even with the chart you provided, the yen has only seen mild deflation, which I still am not convinced is a bad thing.

7/30/2010 11:18:01 AM

FYI:

Monetary Policy, Deflation, and Quantitative Easing
Robert McTeer
Bob McTeer is a fellow at the National Center for Policy Analysis. He was also President of the Dallas Fed for 14 years.
July 30, 2010

Quote :

"The attention paid to the recent statements by St. Louis Fed President Bullard regarding potential deflation and a possible need for 'quantitative easing' by the Fed raises some issues neglected recently. Worries about deflation We should remember that the last deflation scare, especially on the part of Chairman Greenspan, along with a weak economy, low to no job growth, and a potential double-dip recession, led to the easy-money period during much of 2002-2004. I participated in that policy, agreed with it, and even dissented favor of easing in September 2002. The policy was successful in stimulating growth, job creation, and avoiding possible deflation. However, during the recent financial crisis, the motives for and benefits of that policy were ignored. Instead, the policy was blamed for contributing to the real-estate bubble that eventually burst—triggered by the subprime crisis. My opinion is that while easy money during that period may have helped fuel the housing boom and bubble, the proximate cause or trigger of the crisis was the large quantity of securitized subprime mortgage loans that began to re-set to higher mortgage rates and led to massive foreclosures. I can see how low nominal interest rates would fuel the housing boom; what I can't see is how they were responsible for subprime lending and securitization that bordered on fraud. I mention this experience just as a reminder that dealing with a real or imagined deflation is tricky business, doomed, if not to fail, at least to be judged a failure. Remember, successful policy usually means nothing happens (no deflation) while any unintended consequences of that policy receives all the attention. Quantitative Easing This is an unfortunate term that connotes extreme measures and 'printing money' that scares people and drives down stock prices. In reality, all it boils down to is Fed purchases of securities to expand bank lending and investing and get the money supply growing faster. This is conventional monetary policy that should be treated more routinely. Often, the distinction is made that quantitative easing implies the purchase of longer-term Treasury bonds rather than short term Treasury bills. This is a distinction without much difference in the current context. The conventional wisdom is that Fed monetary policy has been extremely easy, there is a great potential for an acceleration in inflation already baked in the cake, and a return to quantitative easing would be a drastic step. The truth is that, except for low short-term interest rates, monetary policy has not been easy for quite a while. Most of the expansion in the Fed's balance sheet and rapid money-supply growth took place at the peak of the financial crisis in the fall of 2008. The balance sheet remains large, and the bank reserves created remain. However, they are primarily on the banks' and the Fed's balance sheet as excess reserves. Those reserves bloat the monetary base (reserves plus currency outside the banking system), but they have not been used for money-creating bank lending and investing. The conventional measures of money, M1 and M2, have been growing only slowly for quite a while. This prolonged and probably inadvertent monetary tightness is showing up in both the consumer and producer price indexes. The headline number for the CPI, for example, has been negative for the past three months. The explosion of money growth in the past two years is a myth and the resulting explosion of inflation is nowhere to be found. While I don't worry much about imminent deflation, I do think that is more likely than a breakout of inflation. Is this a big deal? While I think deflation is more likely in the coming year or two than a significant pick-up in inflation, this is something the Fed should be dealing with in the normal course of business without much fanfare. The remedy is normal, routine open market purchases of whatever. To exaggerate by calling for 'quantitative easing' or 'printing money' given our recent experience is to cause undue alarm. Don't run the movie backwards We continue to hear calls for the Fed to 'shrink its balance sheet' back to normal, primarily by selling its mortgage-backed securities. In my opinion, the current size of the Fed's balance sheet is not a problem. In fact, it helps shrink the budget deficit because of its greater earnings turned over to the Treasury. While the FOMC no doubt would like to substitute traditional government securities for the mortgage-backed securities on its balance sheet, which has to be done without a significant shrinkage of total assets (and liabilities). Otherwise, bank reserves and the money supply would shrink at a time with the economic recovery is very fragile. What is important is not the size of the balance sheet, but a change in its size. Aren't the excess bank reserves inflationary? Potentially yes, but currently no. Even though banks are earning a meager 25 basis points on their reserves, that is not sufficient incentive to keep large quantities of excess reserves uninvested or unloaned. As they were in the mid-1930s, massive excess reserves are the result of banker fear and uncertainty. The banking system has been saved, but it hasn't been made whole yet. Bankers continue to worry about reserve levels and liquidity levels and capital levels. They are willing to lend, but only very conservatively to credit-worthy borrowers. Also, much of the slowdown in bank lending comes from low demand for loans by highly qualified borrowers. The idea that the excess reserves held on banks' balance sheets should be 'mopped up' to prevent them being used in inflationary ways later is a very dangerous idea. They are there voluntarily because bankers feel they are needed. To remove them would cause further bank retrenchment, as it did in the 1930s when the Fed decided to 'mop up' the excess reserves of that time. As the economy and confidence improves, banks will begin using their excess reserves more aggressively. At that point, the Fed will have to be very careful not to stifle that desirable activity on the one hand or let it get out of hand and become inflationary on the other hand. Since they have lots of good, two-handed economists, I think they can pull it off. Stop the bank bashing One more thing: banks are unlikely to stop hunkering down as long as the Administration and Congress are bashing them for political purposes. This is not rocket science. You don't keep bashing over the head the goose you are counting on to lay the golden eggs. There are about 8,000 banks out there that had nothing to do with causing the financial crisis. They were victims; not villains."

http://blogs.forbes.com/streettalk/2010/07/30/monetary-policy-deflation-and-quantitative-easing/

And, FTR, make no mistake, the U.S. Economy is still impressive--despite what Obama and friends have been trying to do to it.

[Edited on July 30, 2010 at 6:15 PM. Reason : .]

7/30/2010 6:13:29 PM

Yeah, let's listen to a former Fed banker for economic policy advice. You realize he's just going to repeat what he's been told, right?

7/30/2010 9:22:50 PM

Quote :

"You're confusing stock prices with actual prices."

Stock prices are actual prices, so are commodities or futures, which directly impact the kind of goods you mentioned. Prices drop in relation to a currency.

Quote :

"Even with the chart you provided, the yen has only seen mild deflation"

Maybe you don't understand the scale of deflation, but what Japan experienced during that period is exceptional.

Quote :

"which I still am not convinced is a bad thing"

Oh, then you're an idiot.

Quote :

"My opinion is that while easy money during that period may have helped fuel the housing boom and bubble, the proximate cause or trigger of the crisis was the large quantity of securitized subprime mortgage loans that began to re-set to higher mortgage rates and led to massive foreclosures. I can see how low nominal interest rates would fuel the housing boom; what I can't see is how they were responsible for subprime lending and securitization that bordered on fraud."

You should have highlighted this as it has more to do with what he's trying to say than just "inflation/deflation" which is little more than monetary whoopla. If we run into deflation, it's and easy fix, print money. I agree, let the market purchases handle it first off, but if they start to miss the mark, adjust by printing money.

7/31/2010 2:43:52 AM

^ It's really pointless to continue going back and forth with you. It's clear to me that you're a "wikilectual" and you don't know what you're posting about.

My question stands: If printing money is the answer, why do we ever have deflation?

7/31/2010 6:33:05 AM

Because not enough money is created to replace that which has been destroyed. I'd urge you to read up on what is "money" before you continue this debate.

7/31/2010 9:57:36 AM

Quote :

"My question stands: If printing money is the answer, why do we ever have deflation?"

I've already tried to explain that. I've explained the reason why japan had deflation and I've offered to explain any other deflation you are interested in.

7/31/2010 10:34:51 AM

Quote :

"Stock prices are actual prices, so are commodities or futures, which directly impact the kind of goods you mentioned. Prices drop in relation to a currency."

Stock prices are actual prices...of stocks. There's a disconnect between stock prices and prices that people pay in grocery stores or department stores. The fact that you don't understand that proves to me that you're totally disconnected from economic reality.

Quote :

"Oh, then you're an idiot."

That's a great counterpoint. The power elite in this country has done an excellent job of convincing the peasantry that falling prices are a bad thing. It's still shocking to me that anyone believes it, but I know you'll sit there all day and swear up and down that an increase in purchasing power is a bad thing. We're going to destroy the value of the dollar because there are people dumb enough to believe that the only answer is to devalue the currency, yet the money is only being printed to pay off the government's special friends and ultra-powerful banks. What a fucking joke.

7/31/2010 1:22:12 PM

Quote :

"There's a disconnect between stock prices and prices that people pay in grocery stores or department stores."

There is a connection there, but that is irrelevant. When I talked about stock prices, it wasn't to show how much money a stock goes for, it was to show how much stock some money will go for.

Quote :

"The power elite in this country has done an excellent job of convincing the peasantry that falling prices are a bad thing."

It's not the power elite, it's not a fucking conspiracy, it's anyone who understands economics.

Quote :

"I know you'll sit there all day and swear up and down that an increase in purchasing power is a bad thing"

A decrease in prices does not necessarily mean an increase in purchasing power. Labor is priced as well. In order for purchasing power to increase, prices on goods and services would have to drop while income stayed the same, this goods would have to cost businesses less while labor costs the same (in essence increased). This generally doesn't happen during deflation, the price of everything drops, there's just less money. The demand for money is linked to... ok I'm probably going too far, just get that part first, I'll go into IS/LM if you somehow manage to understand the first part.

7/31/2010 1:39:01 PM

Quote :

"There is a connection there, but that is irrelevant. When I talked about stock prices, it wasn't to show how much money a stock goes for, it was to show how much stock some money will go for."

It's not irrelevant. Stocks matter for investors, but the stock price will vary based on investor whims and really just about anything that would cause people to buy or sell. The average person doesn't care about stocks, because you can't eat a stock for dinner.

7/31/2010 4:05:02 PM

Once again, it doesn't matter what the metric for the money is, it could be stocks, it could be gold, it could be goat cheese. Those prices are not only effected by the supply and demand of the good that is being priced, but also the supply and demand of the money that the good is priced in. The average person does care about that money, as that is what he will buy his dinner with.

7/31/2010 5:09:22 PM

Quote :

"The power elite in this country has done an excellent job of convincing the peasantry that falling prices are a bad thing."

d357r0y3r

That's extremely condescending. And you don't have to be part of the "power elite" (whoever the hell they are) to understand that if prices fall far enough, profits begin to decrease. This could lead to layoffs, which was one of my concerns about potential deflation.

I am not getting my concern about this from the media--though some have also recently expressed this concern. I learned about this aspect of deflation in college (something you can't get from Wikipedia, Kris). I'm sure some will mock this--probably the same people that call everyone that disagrees with them stupid and then ridicule the very education that the mockers claim to require.

7/31/2010 5:18:41 PM

you should start trying to respond to my arguments rather than just attacking me

7/31/2010 5:30:34 PM

Quote :

"That's extremely condescending. And you don't have to be part of the "power elite" (whoever the hell they are) to understand that if prices fall far enough, profits begin to decrease. This could lead to layoffs, which was one of my concerns about potential deflation. "

This assumes that employers will never lower wages when the value of the currency goes up, or that employees will never accept dynamic wages. I don't believe this is true. As it stands now, the dollars you get paid with are worth less every year. The only reason people aren't up in arms about it is because they don't even realize what's going on.

Profits may decrease in terms of dollars, but real profits do not decrease as a result of deflation. Even if your profits go down, as long as the currency you're trading is more valuable (has greater purchasing power), there isn't a problem.

7/31/2010 5:38:23 PM

Quote :

"^^ It's really pointless to continue going back and forth with you. It's clear to me that you're a 'wikilectual' and you don't know what you're posting about."

^ I really don't care to debate this point, either. The fact that if prices fall far enough, profits will decrease and layoffs could happen is not up for debate--it's just a fact.

I have several current and former high-ranking Fed officials, among other economists and business people, supporting my position concerning the possibility of deflation occurring and its possible effects. I have listed some of these.

In any event, my position stands that deflation is a concern for a number of reasons--and I've clearly indicated that I'm not saying the sky is falling. I've provided more than enough evidence to support my position (and more than others have provided), and don't wish to ride this merry-go-round any longer. Thanks.

7/31/2010 5:52:32 PM

Quote :

"This assumes that employers will never lower wages when the value of the currency goes up, or that employees will never accept dynamic wages."

I find it funny that hooksaw won't explain this. I know why, it's because he just read it in some article and doesn't know why employment would decrease, I just find it funny that he's trying to dodge this.

Employment will decrease, not because wages will go down, which is correct, but because less people and companies will spend money as it becomes worth more. Lower spending will slow the economy lower employment.
(inb4 hooksaw says I looked it up on wikipedia)

Quote :

"as long as the currency you're trading is more valuable (has greater purchasing power)"

But you don't understand why. I wish you would read wikipedia, or some economics literature, or hell, even the body of the articles you post, not just the taglines. Get smart, don't just get news.

[Edited on July 31, 2010 at 6:28 PM. Reason : ]

7/31/2010 6:28:06 PM

^ You can't even keep whose facts you're referring to straight. It was d357r0y3r who posted about "wages"; I posted about "profits"--there's a difference.

Once more for the ill-informed:

Quote :

"The fact that if prices fall far enough, profits will decrease and layoffs could happen is not up for debate--it's just a fact."

Feel free to try to disprove this if you like, but I'll save you the trouble--you can't.

7/31/2010 8:29:13 PM

Quote :

"Feel free to try to disprove this if you like, but I'll save you the trouble--you can't."

I didn't try to disprove it, I explained why it's true, because you couldn't. d357r0y3r was trying to get you to defend that statement, you of course cannot, because you don't actually know what it means.

You don't know why prices falling causes unemployment. I had to explain that falling prices means increasing value of money. As the value of money increases people spend less. As people spend less we see businesses cut cost and reduce output, this causes unemployment.

7/31/2010 8:43:49 PM

Quote :

"^ It's really pointless to continue going back and forth with you. It's clear to me that you're a 'wikilectual' and you don't know what you're posting about."

Quote :

"[A]nd [I] don't wish to ride this merry-go-round any longer. Thanks."

7/31/2010 8:58:27 PM

the pointless merry go round that is "making an argument and defending it logically"

Imagine that, you'd actually have to understand the arguments you make, not just make them because someone said it sometime.

7/31/2010 9:44:31 PM

^ Yeah, I'm sure the guy who posts ridiculous stuff like this. . .

Quote :

"1.When you here the word Christian what denomination or group do you think of. Faggots 2. Your views on the history of the Christian faith. It's the history of fags. 3. Your views on Christian beliefs. They're gay 4. What your spiritual beliefs are. Not Christian 5. The experiences that brought about your spiritual beliefs. Not being a faggot."

Kris

message_topic.aspx?topic=599648

. . .wants to have a rational discussion. Weren't you in the penalty box for several years, Kris, for posting things like this and for being a general d-bag? Just asking.

8/1/2010 8:21:08 PM

Quote :

"I'm sure the guy who posts ridiculous stuff like this. . ."

L 2 take a joke. Read the thread, the guy said any input was good, I made a post to show that is not always true in a funny, yet offensive, manner.

Quote :

"Weren't you in the penalty box for several years, Kris, for posting things like this and for being a general d-bag? Just asking."

I've been suspended for a few weeks before for things posted in chit chat and haxoring, but not really anything posted here. Oh and I ruined the whole three posts an hour thing for everyone by egregiously abusing it. But what do my antics have to do with this thread, oh that's right, it distracts from the argument that you can't participate in due to your stupidity.

8/1/2010 8:46:53 PM

^ What's your degree major? Do you even hold a degree? Just asking.

[Edited on August 1, 2010 at 9:01 PM. Reason : I think your suspension was more than a few weeks. And what you posted wasn't funny at all. ]

8/1/2010 9:00:59 PM

CS and MBA

Quote :

"I think your suspension was more than a few weeks."

To be honest, I don't remember, it certainly wasn't for a year though. I mean I've probably gone about a year without posting a few times, but not due to suspension.

[Edited on August 1, 2010 at 9:28 PM. Reason : ]

8/1/2010 9:28:33 PM

Quote :

"You don't know why prices falling causes unemployment. I had to explain that falling prices means increasing value of money. As the value of money increases people spend less. As people spend less we see businesses cut cost and reduce output, this causes unemployment."

Falling prices does not always mean increasing value of money. Many products go down in price, even though we're in an inflationary environment.

In a deflationary environment, people may spend less, but I don't think that's necessarily a bad thing. I get the whole "spending is all that matters" viewpoint, but it doesn't match up with reality. When you have a lot of spending and very little savings, that's a terrible thing, because no one can front the money to pay for capital without borrowing. Could deflation potentially contribute to higher unemployment? Yes. Is that worse than the alternative? I don't think so. At least if there's deflation, the money that the business receives through transactions is worth more.

8/2/2010 1:15:09 AM

LOL! Even Paul Krugman agrees with me (sort of):

'This Week' Transcript
August 1, 2010

Quote :

" [Christiane] AMANPOUR: So there you have it. Economic security, obviously, is the number-one preoccupation, as it always would be wherever there is these huge problems of unemployment. There is a huge debate right now, all leading economists basically disagree on how and what effect stimulus has had, what it means for future economic policy. Is it deficit reduction austerity? Is it more stimulus? Where do we go and what does it mean to people? KRUGMAN: Well, what it means to people, I think, is a lot of confusion, which is -- which is a problem, right? They're not hearing any clear message. You know, the way I look at it is that there are two sides in this debate -- I call them inflationistas and deflationistas -- that were -- one side, the inflationistas, have said, 'Oh, god, we have this -- we have budget deficits. The Fed is printing money. We're going to have inflation. Interest rates are going to go sky-high.' The deflationistas have said, you know, that we've had a major financial crisis. In the fact of that, the Obama stimulus plan is too small [disagree], interest rates are going to stay low because nobody wants to spend, the -- you know, that the risk is deflation. So far, the deflationistas have been totally right. What's interesting is that the political debate is being dominated by the people who've been wrong about everything up to this point, who said, well, you know, actually, interest rates are lower. They just hit a -- more than a year low just now."

http://abcnews.go.com/ThisWeek/week-transcript-pelosi-gates/story?id=11298444&page=3

^ I have indicated a number of times that layoffs due to possible deflation was ONE concern. I even emphasized "one" every time.

[Edited on August 2, 2010 at 5:12 AM. Reason : .]

8/2/2010 5:03:23 AM

Quote :

"So far, the deflationistas have been totally right. What's interesting is that the political debate is being dominated by the people who've been wrong about everything up to this point, who said, well, you know, actually, interest rates are lower. They just hit a -- more than a year low just now."

This man is totally incompetent. How can you take his writing as any more than propaganda at this point?

The deflationists are, and always will be, dead wrong. For him to say that the political debate is dominated by people that have been wrong is exactly right, though. Ben Bernanke is not an economist in the true keynesian tradition - he's a monetarist. He will keep interest rates low, because the alternative is massive inflation.

We're going to have a Japanese-style lost decade. The problem is that once we do that, the recovery still won't have happened, and we won't have prevented the inflationary disaster that is coming.

8/2/2010 11:37:31 AM

^ My dislike for Krugman and his positions is well-documented here. I was simply making a point--but this, of course, is self-evident.

I'm not a big Bernanke fan, but I don't think him being a monetarist is a huge problem--since the Fed sets monetary policy. Furthermore, monetarism is just another subset in economics (and viewpoint)--much like a specialization in medicine. And I don't have a problem associating myself with Friedmanian positions, do you?

I do agree with you that potential deflation is a short-term concern and inflation is more of a long-term concern. I know this is popular thinking in some conservative circles, but I disagree with you the United States will experience a "Japanese-style lost decade." I see indications of us getting back on very solid and broad-based economic footing within a two-year period--despite what Obama and his supporters are doing and attempting to do to the U.S. economy.

8/2/2010 3:17:33 PM

Quote :

"Falling prices does not always mean increasing value of money."

No, that's exactly what they mean. Prices are nothing more than goods measured against currency, thus if the cost of goods goes down, the value of money MUST go up.

Quote :

"When you have a lot of spending and very little savings, that's a terrible thing, because no one can front the money to pay for capital without borrowing."

What's so bad about that? Spending nurtures investment. As more people spend, the return on savings increases to encourage it naturally, it's not the same in reverse, this is why we always have to coddle spending as it can disappear and be difficult to get back. Spending requires trust in the economy, savings requires either trust in spending, or distrust in the economy.

Quote :

"At least if there's deflation, the money that the business receives through transactions is worth more."

Which encourages them to spend less of the money as they see it increasing in value. This causes them to hire less employees or buy less equipment, causing the economy to spiral downwards. On the other hand if their money is worth less, they're encouraged to get rid of it quickly by investing in something with returns that can offset inflation(or lack of growth) by expanding their business, lowering production costs, inventing new things, etc. Well obviously you would ask "well where's the upper limit?" There is one, as high inflation or rapidly increasing inflation causes distrust in the economy, and can cause companies to invest elsewhere, but slight inflation is about where the balancing point is.

Quote :

"Even Paul Krugman agrees with me (sort of):"

The only reason you are interested in deflation is the possibility that it could cause a bad economic climate as you root for our country's failure. You don't seem to understand that deflation would REQUIRE us to greatly increase government spending. The logical conclusion to the statement "we are suffering/will suffer from inflation" is that the stimulus plan was TOO SMALL did not inject enough money into the economy to discourage hoarding. YOU CANT AGREE WITH ONE AND DISAGREE WITH THE OTHER WITHOUT BEING A COMPLETE FOOL.

Quote :

"The deflationists are, and always will be, dead wrong."

How else but deflation would you explain the large and growing money reserves in companies that are experiencing profit growth?

Quote :

"He will keep interest rates low, because the alternative is massive inflation."

What is this? I don't even...
This statement makes no sense. If he RAISES interest rates money will be worth LESS?

Quote :

"We're going to have a Japanese-style lost decade."

That's not possible, at least not for several years. What you are describing would require steady GDP shrinkage, which isn't very likely, AND steady low unemployment which REALLY isn't likely.

Quote :

"I disagree with you the United States will experience a "Japanese-style lost decade." I see indications of us getting back on very solid and broad-based economic footing within a two-year period--despite what Obama and his supporters are doing and attempting to do to the U.S. economy."

This is the smartest thing you've said all month. Keep this up and we might start agreeing on some things.

8/2/2010 7:54:20 PM

^

Quote :

"The only reason you are interested in deflation is the possibility that it could cause a bad economic climate as you root for our country's Obama's failure."

Fixed.

Quote :

"You don't seem to understand that deflation would REQUIRE us to greatly increase government spending."

FOMC securities buying =/= Bigger and/or more stimulus spending

Quote :

"The logical conclusion to the statement 'we are suffering/will suffer from inflation' is that the stimulus plan was TOO SMALL did not inject enough money into the economy to discourage hoarding. YOU CANT AGREE WITH ONE AND DISAGREE WITH THE OTHER WITHOUT BEING A COMPLETE FOOL."

This is absurd--as if a "stimulus," such as it is, is the only way to help control inflation. And I don't even agree that the stimulus in question accomplishes this. You also seem to be confusing fiscal policy with monetary policy--though I'm not suggesting that they're entirely mutually exclusive. Just a refresher: The president and the Congress set fiscal policy; the Fed sets monetary policy.

As anyone who knows anything about the Fed's activities knows, inflation can potentially be controlled by FOMC operations, altering reserve requirements, and adjusting the discount rate. These actions can restrict the money supply and help reduce or prevent inflation.

And concerning savings, you seem to be parroting typical Keynesian talking points. Anyone who knows anything about economics is familiar with your veiled references to the paradox of thrift. You still need to consider the consumption-investment ratio, among other things.

Quote :

"This is the smartest thing you've said all month. Keep this up and we might start agreeing on some things."

Gee, thanks.

I could post a lot more, but I honestly find you tiring.

8/2/2010 8:22:38 PM

Quote :

"Alan Greenspan told NBC's Meet the Press it's high-income Americans who are doing most of the spending these days; big banks are, as he put it, "doing much better," and large corporations are "in excellent shape." Greenspan: The rest of the economy, small business, small banks and a very significant amount of the labor force, which is in tragic unemployment, long-term unemployment, that is pulling the economy apart. The average of those two is what we are looking at."

Quote :

" Diane Swonk: We found it more politically expedient to use a very advanced financial system to fill the gap in wages by giving people access to credit, perhaps when they couldn't even service the debt. Swonk says it's all come home to roost in this split recovery. Swonk: We've seen enormous political backlash, and there is no comfort for anyone who's wealthy, if they've got to deal with a pretty big class warfare, at the political level, via taxes or anything else."

It's hard to be rich when the mobs with pitchforks are at your door.

[Edited on August 2, 2010 at 8:35 PM. Reason : .]

8/2/2010 8:34:11 PM

^ Please stop posting class warfare nonsense.

8/2/2010 8:49:29 PM

It looks like this guy spent a good chunk of his weekend reading up on monetary policy and deflation.

8/2/2010 9:10:26 PM

^ Who, Kris?

8/2/2010 9:13:25 PM

You fool. I can't tell if you're just outright trolling or you tried to read up on this stuff and epic failed in your understanding of it.

8/2/2010 10:10:19 PM

Quote :

"FOMC securities buying =/= Bigger and/or more stimulus spending"

You wouldn't have enough, interest rate is already effectively zero, little they can do aside from giving money away, which is a possibility. The fed increasing deficit would greatly increase money supply.

Quote :

"This is absurd--as if a "stimulus," such as it is, is the only way to help control inflation."

We're controlling deflation, not inflation.

Quote :

"You also seem to be confusing fiscal policy with monetary policy"

I'll assure you I'm not.

Quote :

"As anyone who knows anything about the Fed's activities knows, inflation can potentially be controlled by FOMC operations, altering reserve requirements, and adjusting the discount rate."

Again, it's not inflation we're concerned about, did the article you read not have anything about deflation? It doesn't surprise me most would probably just talk about inflation as that tends to come up more. Oh, I found the article you're lifting all this from: http://www.investopedia.com/articles/04/050504.asp. But let me thank you for reading this and bettering your economic knowledge, it will help you analyze things you read and interpret them a bit better.

The reason that the current system is different from what that article is talking about is that those are the normal ways we fix problems like this when they pop up, unfortunately this one is MUCH bigger, we're using those standard solutions already, they're not enough, we need something more drastic. You'll have to read something a bit less broad and general to understand the possible solutions from here.

Quote :

"Anyone who knows anything about economics is familiar with your veiled references to the paradox of thrift."

If they were then I wouldn't have to be explaining it right now.

Quote :

"You still need to consider the consumption-investment ratio, among other things."

We're experiencing the perfect test for this little battle right now, and we're already seeing the stickiness of prices. We're also seeing a lot of literal hoarding, I tried to find the article about it, I read it earlier today, but I can't seem to find it.

Quote :

"I could post a lot more, but I honestly find you tiring."

Be honest, you find learning tiring. Oh and take a compliment, that's the best you'll get from me, that was original content, a product of you processing and analyzing the news you read rather than spitting it right back out. I liked it, and I would like you to post more of that and less of the OMG HERES AN ARTICLE. It's fine if you don't want to continue the more technical debate, I understand others don't find it as interesting as I do, it won't hurt my feelings.

8/2/2010 11:24:50 PM

Quote :

"No, that's exactly what they mean. Prices are nothing more than goods measured against currency, thus if the cost of goods goes down, the value of money MUST go up."

Today, a ten year old computer would sell for a tiny fraction of its original retail price. This is not because money is one hundred times more valuable. So, you're wrong, if the cost of goods goes down, the value of money doesn't necessarily go up.

Quote :

"What's so bad about that? Spending nurtures investment. As more people spend, the return on savings increases to encourage it naturally, it's not the same in reverse, this is why we always have to coddle spending as it can disappear and be difficult to get back. Spending requires trust in the economy, savings requires either trust in spending, or distrust in the economy."

Why would you trust the economy? That's like trusting society. There's too many players involved for their to be any meaningful level of trust. Trust exists between individuals, not individuals and concepts.

If everyone consumed or spent all of their income, you couldn't have investment, and you couldn't have capital. The original capital investment came about when someone sacrificed, and instead of spending all that they made, they put some away so they could have more later. Savings are absolutely vital to having a strong and stable economy.

Quote :

"Which encourages them to spend less of the money as they see it increasing in value. This causes them to hire less employees or buy less equipment, causing the economy to spiral downwards. On the other hand if their money is worth less, they're encouraged to get rid of it quickly by investing in something with returns that can offset inflation(or lack of growth) by expanding their business, lowering production costs, inventing new things, etc."

It encourages thrift, which isn't a bad thing. You may not see "booms" (as is very characteristic with a central banking system that can only inflate), but you'll also see less busts.

Quote :

"What is this? I don't even... This statement makes no sense. If he RAISES interest rates money will be worth LESS?"

The only reason we're not having inflation now is because the banks are holding the excess reserves provided by the Fed. The money that the Fed has created thus far has not made it into circulation. If the Fed was to print a hundred trillion dollars, but it was all held by the banks and the banks weren't loaning any of it out, you wouldn't see increasing prices, despite the fact that the monetary base was expanded.

If interest rates go up, banks will no longer be able to keep rolling over these excess reserves from the Fed. If they want to borrow money, they'll actually have to pay interest on it. There's no way that many of these "zombie banks" would be able to do that...at least not without starting to lend money again. As it stands now, they're borrowing money at close to 0% and selling it back to the government for about a 3% return - it's a great deal, for them. There's really only two ways out - the trillions of dollars in excess reserves makes it into circulation, or we have another financial crisis...this time, much worse.

Quote :

"I disagree with you the United States will experience a "Japanese-style lost decade." I see indications of us getting back on very solid and broad-based economic footing within a two-year period--despite what Obama and his supporters are doing and attempting to do to the U.S. economy.""

What is your basis for believing this, aside from blind optimism? Apparently, you've greatly underestimated the damage being done to the economy by our government.

8/3/2010 11:20:14 AM

To Potty Mouth: Please just shut up and stop posting. You represent everything that's wrong with this forum--why don't you just go get your 90th alias suspended?

To Kris:

Quote :

"You wouldn't have enough, interest rate is already effectively zero, little they can do aside from giving money away, which is a possibility. The fed increasing deficit would greatly increase money supply."

I was obviously trying to address this by you:

Quote :

"You don't seem to understand that deflation would REQUIRE us to greatly increase government spending."

I thought you meant FOMC activity, rather than stimulus spending. But you apparently meant even more/larger stimulus, which is a fiscal "solution."

Quote :

"We're controlling deflation, not inflation."

Yes, QED. If you remember, I was the one who brought up the subject of deflation. I brought up inflation only to address this by you:

Quote :

"The logical conclusion to the statement 'we are suffering/will suffer from inflation' is that the stimulus plan was TOO SMALL did not inject enough money into the economy to discourage hoarding."

Quote :

"YOU CANT AGREE WITH ONE AND DISAGREE WITH THE OTHER WITHOUT BEING A COMPLETE FOOL."

This is a lie and you know it. Many economists--who are not fools--have concerns about stimulus spending and we now see that it's not performing as advertised. The best we get is "Well, it could've been worse!" You and I disagree politically--and never the twain shall meet.

Quote :

"I'll assure you I'm not [confusing fiscal policy with monetary policy]."

You most certainly are. This statement by you. . .

Quote :

"The logical conclusion to the statement 'we are suffering/will suffer from inflation' is that the stimulus plan was TOO SMALL did not inject enough money into the economy to discourage hoarding."

. . .clearly mixes a fiscal "solution" (stimulus) to inflation, which you brought up, with what is traditionally and structurally dealt with by monetary policy.

Quote :

"Oh, I found the article you're lifting all this from: http://www.investopedia.com/articles/04/050504.asp. But let me thank you for reading this and bettering your economic knowledge, it will help you analyze things you read and interpret them a bit better."

This is a flat-out lie and I think you know it--but thanks for revealing your source for your parrot points. The GOD'S HONEST TRUTH is that all of what I posted and everything else I post (with the exception of linked articles) comes from my own education in economics and my personal interest in it.

The only thing I looked up in the post above is the "consumption-investment ratio." I just couldn't remember the exact term for it. This is the actual source that I used:

Quote :

"They argue that hoarding of money (an increase in the demand for money) does not necessarily lead to a change in the population's consumption-investment ratio. In other words, suppose the demand for money increased to the point that the level of spending in the economy fell by half. If the remaining spending is still divided into the old consumption-investment ratio, then all prices would simply fall by half and productivity would remain unchanged."

http://en.wikipedia.org/wiki/Paradox_of_thrift

And, yes, I used Wikipedia--but not for my original ideas. I used it to look up a term I couldn't remember because it's quick and I didn't want to noodle around on Google all night.

Quote :

"If they were [familiar with the paradox of thrift] then I wouldn't have to be explaining it right now."

I don't need it explained to me. And I'm not bragging about having knowledge of this--it's basic micro- and macroeconomics where I come from. In addition, George Will was even talking casually about it on This Week on Sunday; he didn't take a lot of time explaining it--because it's considered common economic knowledge.

Quote :

"We're experiencing the perfect test for this little battle [related to the consumption-investment ratio and the paradox of thrift] right now. . . ."

I agree with you. We'll see what happens.

Quote :

"Be honest, you find learning tiring. Oh and take a compliment, that's the best you'll get from me, that was original content, a product of you processing and analyzing the news you read rather than spitting it right back out. I liked it, and I would like you to post more of that and less of the OMG HERES AN ARTICLE. It's fine if you don't want to continue the more technical debate, I understand others don't find it as interesting as I do, it won't hurt my feelings."

This is, perhaps, the biggest crock of bunk you've posted yet. Do I know more than the average person about economics? Yes, a metric fuckton. Do I know more than the average TSB-er? Yes, you'd better believe it. Am I an economist? NO--and I never claimed to be one! But I have held my own here and elsewhere with professors of economics, and they were a hell of a lot more reasonable than some of you.

I'm interested in economics for a number of reasons, but one big reason is that I find the counterintuitive things to be fascinating, such as the discouraged-worker effect and the tragedy of commons, as examples. It's really no more complicated than this.

In summary, I brought up a legitimate topic for discussion: deflation. And all some of you have done is carp and howl about how smart you are and how dumb I am. But you weren't smart enough to spot this fast-growing concern on the horizon, were you?

I don't think some of you--particularly you, Kris--want to have a good discussion. You just want to metaphorically poke your finger in my eye and take swipes at my perceived ideology. But enough is enough--I don't care what you think I know or don't know.

Oh, look--here it is again!

More Economists Cite Concerns Over Deflation
August 2, 2010

Quote :

"So I think the burden is on those who say deflation is fine and we shouldn't worry about it. The burden is on them to make the case."

Quote :

"He makes some great points there. Inflation expectations are a critical component of this. And I would go by the market measures - the so-called Tips based measures. If they are all around two percent or higher than two percent, then I wouldnt be as worried. But recently the five-year Tips based measure of expected inflation has fallen quite a bit from where it was earlier in the year to about 1.4 percent. So right now thats not quite low enough to really get worried. But if it starts to go, say, below one percent or lower then you might be sliding toward this deflationary outcome."

--St. Louis Federal Reserve Bank President James Bullard

http://www.npr.org/templates/story/story.php?storyId=128936438

[Edited on August 3, 2010 at 12:34 PM. Reason : ^ I'll answer your question soon, d357r0y3r. ]

8/3/2010 12:21:51 PM

You're going to have to do a lot more studying to recover from this gaffe

Quote :

"This is absurd--as if a "stimulus," such as it is, is the only way to help control inflation. And I don't even agree that the stimulus in question accomplishes this."

So far, it appears as if all you have done is name-dropped a few terms related to economic policy without any sort of explanation as to how it relates to your concern of deflation or what an appropriate response should be.

Such as:

Quote :

"As anyone who knows anything about the Fed's activities knows, inflation can potentially be controlled by FOMC operations, altering reserve requirements, and adjusting the discount rate. These actions can restrict the money supply and help reduce or prevent inflation."

We all know that yet you still felt compelled to restate it. You then don't explain how a ZIRP environment and .25% paid on excess reserves applies to fighting deflation.

You've also somehow managed to get yourself in a twist over the "stimulus bill", correctly calling it a fiscal response, with the idea that fed actions on the monetary side of things aren't stimulus. Both fiscal and monetary policy are intended to stimulate the economy.

I'm not really sure what you're even trying to discuss anymore? That some economists are worried about deflation so that means you are too...but ugh, lets not try to discuss it?


p.s.

Quote :

"To Potty Mouth: Please just shut up and stop posting. You represent everything that's wrong with this forum--why don't you just go get your 90th alias suspended?"

Do I know you? Because you're acting like you know me and I don't know anyone personally from this board.

8/3/2010 5:36:10 PM

Quote :

"I thought you meant FOMC activity, rather than stimulus spending. But you apparently meant even more/larger stimulus, which is a fiscal "solution.""

That's irrelevant. The fact is that government debt (in fact any debt) increases the amount of money we have out there, helping to fight deflation.

Quote :

"have concerns about stimulus spending and we now see that it's not performing as advertised"

These concerns are either "the stimulus was too big, we'll have inflation" or "the stimulus was too small we'll have deflation", any other stance is logically inconsistent. Krugman outright states this in the article you posted.

Quote :

"clearly mixes a fiscal "solution" (stimulus) to inflation, which you brought up, with what is traditionally and structurally dealt with by monetary policy."

So? Increasing government debt will inflate the currency, regardless of whether you consider it a "fiscal" solution or a "monetary" one. The solutions that whatever you read are the traditional ways to deal with deflation, but they aren't enough.

Quote :

"This is a flat-out lie and I think you know it"

I just typed a bunch of the terms I've never seen you used before and weren't really relevant to the conversation into google and that's what came up. It could be mere coincidence that your rather irrelevant encyclopedic post nearly mirrors what is discussed in that article. But why are you so ashamed? We didn't invent economics, we all had to learn it somewhere, what's wrong with internet encyclopedia articles?

Quote :

"And, yes, I used Wikipedia--but not for my original ideas. I used it to look up a term I couldn't remember because it's quick and I didn't want to noodle around on Google all night."

Stop being so ashamed. There's nothing wrong with looking things up, much better than pulling them out of your ass. You should be proud.

Quote :

"I don't need it explained to me."

I wasn't explaining it to you, I was explaining it to destroyer.

Quote :

"Do I know more than the average person about economics? Yes, a metric fuckton. Do I know more than the average TSB-er? Yes, you'd better believe it. Am I an economist? NO--and I never claimed to be one! But I have held my own here and elsewhere with professors of economics, and they were a hell of a lot more reasonable than some of you."

Stop trying to impress me. I know that your knowledge is lacking, you've missed some rather simple points, not to mention I had to egg you on to even get you to respond with actual thought. You are getting better though, keep it up and stop being such an asshole and maybe one day you'll be as good as you want me to think you are.

Quote :

"And all some of you have done is carp and howl about how smart you are and how dumb I am. But you weren't smart enough to spot this fast-growing concern on the horizon, were you?"

Most people, myself included, knew it the money supply balance would have to be shoved one way or the other as we began to recover, just as it has with most any recession in the past. I suppose I didn't really think about how big of a problem it could be until Krugman talked about it last year. With near 0% interest rates and money still being hoarded it was a pretty easy sell that deflation would be a growing concern.

Quote :

"I don't think some of you--particularly you, Kris--want to have a good discussion."

Oh I do, and I'm glad we're finally starting to have one. I think you don't want to have a discussion as actually defending your opinions is much more difficult than just posting an article that supports them. Oh look, you've started doing that again!

8/3/2010 6:06:35 PM

^ I posted my position clearly and at length numerous times--I don't care to do so anymore. You either get it or you don't.

I'm sure someone will respond with "NO, YOU DIDN'T!!!1" I honestly don't care to have a discussion with you or others about deflation anymore.

Answer Fed official Bullard's point:

Quote :

"So I think the burden is on those who say deflation is fine and we shouldn't worry about it. The burden is on them to make the case."

And here's another source:

U.S. may face deflation, a problem Japan understands too well
Economists worry that America could be edging closer to the trap that cost the other nation more than a decade of growth.
July 26, 2010

Quote :

"But increasingly, economists and other analysts are expressing concern that the United States could be edging closer to a different problem — the kind of deflationary trap that cost Japan more than a decade of growth and economic progress."

Quote :

"When deflation begins, prices fall. At first that seems like a good thing. But soon, lower prices cut into business profits, and managers begin to trim payrolls. That in turn undermines consumers' buying power, leading to more pressure on profits, jobs and wages — as well as cutbacks in expansion and in the purchase of new plants and equipment. Also, consumers who are financially able to buy often wait for still lower prices, adding to the deflationary trend."

http://articles.latimes.com/2010/jul/26/business/la-fi-0726-deflation-economy-20100726

[Edited on August 3, 2010 at 6:14 PM. Reason : I obviously don't believe we will reach Japan-level deflation. I have posted this.]

8/3/2010 6:12:27 PM

The only one who you are addressing with

Quote :

"Answer Fed official Bullard's point:"

is d357r0y3r.

He is the only one who has argued for being ok with mild deflation. This is how we know you don't grasp economics because you can't even figure out what points people are making to address them properly with anything more than

[here is an article I found that addresses my point]
[i think]

8/3/2010 6:41:16 PM

Quote :

"I posted my position clearly and at length numerous times"

And I've responded, I've yet to completely get that courtesy from you. You either restate what you just said, argue against something irrelevant, or argue against something that I posted for someone else.

Quote :

"I honestly don't care to have a discussion with you or others about deflation anymore."

I didn't expect you to go this long, I expected you to just post articles, which is what it seems like you're devolving to now.

8/3/2010 7:07:31 PM

Quote :

"So I think the burden is on those who say deflation is fine and we shouldn't worry about it. The burden is on them to make the case."

Why isn't the burden on deflationists to make the case, as well? No one in this thread is making a very good case for deflation. I'd say that camp is making much more of an extreme claim. For Christ's sake, they're telling us that we're going to create trillion upon trillions of dollars in new money...and the value of the dollar is going to go up? That's fucking absurd. Tell me why it isn't.

And, just a hint here...I'm an Austrian. I don't give a damn what some dude from the Fed says, because the Fed has no credibility with me. They engineered this crisis and now they're engineering another one of a much greater magnitude. We don't know what kind of transactions they're making. They operate in secrecy. They swore up and down that the economy was fine until the crash hit. Now, Bernanke sits on the sidelines and plays dumb, using terminology like "unusually uncertain" to describe the economy.

Quote :

"I obviously don't believe we will reach Japan-level deflation. I have posted this."

Japan-level deflation? You mean 1-2% annual deflation at most? Even if inflation is preferable to deflation, how is 1-2% deflation better than 3-4% inflation? And, in reality, inflation is much higher - CPI conveniently ignores the price of food and energy, which are both going up in price right now. We're talking about all dollars, everywhere, losing 3-4% of their value per year. When you only make 15k-20k a year, that's pretty substantial.

Quote :

"But soon, lower prices cut into business profits, and managers begin to trim payrolls. That in turn undermines consumers' buying power, leading to more pressure on profits, jobs and wages — as well as cutbacks in expansion and in the purchase of new plants and equipment."

This is far from settled. I know mainstream economic thought likes to treat it as settled, but it's not.

Quote :

"Also, consumers who are financially able to buy often wait for still lower prices, adding to the deflationary trend."

Yes, just like no one buys iPhones, because you can buy one for cheaper a year from now. Oh. Again, thrift isn't a bad thing.

8/3/2010 7:17:28 PM

1. I posted my concern about potential deflation. And I posted a source to support it.

http://www.nytimes.com/2010/07/30/business/economy/30fed.html

2. I posted why I believe potential deflation is a concern.

Quote :

"If the price level of goods and services falls far enough, businesses could begin laying off even more workers--this is one major concern."

message_topic.aspx?topic=500489&page=38

3. I posted even more sources to support my position.

http://blogs.forbes.com/streettalk/2010/07/30/monetary-policy-deflation-and-quantitative-easing/

http://abcnews.go.com/ThisWeek/week-transcript-pelosi-gates/story?id=11298444&page=3

http://en.wikipedia.org/wiki/Paradox_of_thrift

http://www.npr.org/templates/story/story.php?storyId=128936438

4. I even explained how I learned the lesson of deflation potentially leading to layoffs.

Quote :

"I am not getting my concern about this from the media--though some have also recently expressed this concern. I learned about this aspect of deflation in college (something you can't get from Wikipedia, Kris). I'm sure some will mock this--probably the same people that call everyone that disagrees with them stupid and then ridicule the very education that the mockers claim to require."

5. I posted another source to support my position.

http://articles.latimes.com/2010/jul/26/business/la-fi-0726-deflation-economy-20100726

6. And, in summary, this is a big problem right now:

Quote :

"AMANPOUR: So there you have it. Economic security, obviously, is the number-one preoccupation, as it always would be wherever there is these huge problems of unemployment. There is a huge debate right now, all leading economists basically disagree on how and what effect stimulus has had, what it means for future economic policy. Is it deficit reduction austerity? Is it more stimulus? Where do we go and what does it mean to people? KRUGMAN: Well, what it means to people, I think, is a lot of confusion, which is -- which is a problem, right? They're not hearing any clear message."

http://abcnews.go.com/ThisWeek/week-transcript-pelosi-gates/story?id=11298444&page=3

This is one of the most truthful things I've ever heard Krugman say. There is a tremendous amount of economic (and other) confusion right now--and anyone who tells you that he or she has it all figured out is damned liar.

As for me, I have clearly stated that I believe potential deflation could be a short-term problem the United States may have to deal with. I have given more than adequate reasons and source support for this.

The only question I haven't answered is d357r0y3r's:

Quote :

"What is your basis for believing this, aside from blind optimism?"

My short answer, for now, is the time-tested power and productivity of American ingenuity and entrepreneurship. And there are other positive economic signs--as I indicated, despite what Obama and friends are doing to the economy. I'll give you a more detailed answer in time; I want to research a couple of things. Fair enough, d357r0y3r?

8/4/2010 2:34:13 AM

^ we underwent a very mild deflationary period 2 years ago, despite the fears of people like Peter Schiff and plenty of other conservatives, on the government spending causing massive spiraling inflation.

Deflation obviously has its own problems, but it also has its own benefits. It hasn't been that bad, and we have been for the past nearly 2 years undergoing slight inflation that's considered "healthy" by prevailing economic theory.

8/4/2010 2:54:12 AM

Quote :

"Peter Schiff"

Peter Schiff is a fucking moron, the fact that some people and news organizations are treating him as some sort of legitimate economics expert is beyond me.

8/5/2010 6:11:38 PM