Quote from benwm:
Fetus - Martinghoul, zdreg and a few of us were having a nice little discussion, thinking we might actually learn something from thus thread,
and you start pulling up a chart of the Nikkei from eTrade..? :eek:
What's next, a quote from Jim Cramer?
Is this the basis of why deflation is bad, because stocks went down in Japan? Unlike the US, where stocks always go up?
Or hyperinflationary Germany in the 1920s or Zimbabwe in recent times where stocks in local currency went into the stratosphere?
Japan had a stock bubble, valuations got out of hand and prices came back into line. Big deal, bubbles happen, Japan's was 20 years ago. I didn't see any deflation deniers on the board as far as Japan is concerned. It is common knowledge that Japan HAS had mild deflation on and off for ten to fifteen years, in the region of -1 to -2% some years.
But please tell me why mild deflation of -1 to -2% is so terrible? It means your money goes further, dude!
If you go shopping for a laptop and it is 10% cheaper than last month do you think this so terrible? Do you offer to pay 10% more?
As another poster said, which assets would you like to inflate to offset price declines in electrical goods? Food? Energy? Well buddy, your luck's in because we've had price rises already AND THANKS TO BUBBLE BEN THERE IS MORE TO COME!! 
Slack domestic demand? Sure, that's why GDP has been flat for donkey's years. But maybe the Japanese realized that maxing out on their credit card to buy some useless junk consumer goods was less preferable to saving their hard earned cash for a rainy day? And now those yen which they've saved all this time go quite far when you convert into other currencies.
Think of it as a squirrel collecting acorns for the winter.
What, benwm? Is it Etrade you don't like or charts? Let's see, the last time I checked, a chart is a chart is a chart, so it must be Etrade you hate. I guess I can try to pick a different provider next time, but the point is that this is a picture of asset deflation in Japan. We have one of our own right here in the USA from October 2007 to March of 2009 or so, and I believe we'll see more pictures like them in the not too distant future. Sorry if I invaded your nice little private discussion in this public forum. I'll leave you guys alone together if you want, but I thought it might be interesting to join the debate.
Also, I never made a moral judgment about whether or not deflation is "bad." My point was simply that deflation is a fact. And yes, of course in a reinflationary period (a mere respite/correction in the midst of a deflationary cycle) there are pockets of deflation and inflation simultaneously, but in the aforementioned first deflationary leg down, almost everything related to assets, commodities, consumer products and debt fell precipitously together. When in the aggregate you have sustained, sharply declining prices, I call that deflation. What do you call it?
Take one more look at that Nikkei chart if it doesn't offend you too much. You call that mild? I guess "mild" is in the eye of the beholder.
Lastly, oh yes it's wonderful to have persistently declining prices and have the buying power of your domestic currency go up -- that is as long as you have plenty of currency. The problem is that decades of credit and asset inflation have left quite a large lot of Americans cash poor. Many of them have their net worth tied up in assets like their homes and in consumer debt of all kinds. When prices of assets collapse, what happens to that net worth? When desperate, over leveraged lenders call in debts and debtors don't have cash to pay those debts, does the increase in buying power of a purchase instrument you don't have matter much? In deflation, the only reason that cash notes become more powerful with respect to buying power is because people are rushing to get out of crushing debt and collapsing asset prices. Where do they all want to go? To cash. It certainly isn't because the economy is producing.
So if you have a lot of cash, good for you. You can watch a lot of people suffer while you enjoy your new found buying power.
Is the deflationary process necessary after decades of credit induced asset inflation? Certainly! Is it painful nonetheless? Absolutely! Will we be better off in the long run? Of this, I am not so sure. When you realize that every citizen of this country would have to come up with over $44,000 to eliminate the $14 trillion (and still growing $1 trillion a year) national debt, default is not beyond the limits of probability. That wouldn't be pretty. I don't think default is likely, but all that is needed is for our foreign sugar daddies to lose confidence in our ability to service that debt without destroying our own currency.
As for the Japanese, read the NYT article I included in my prior post. It doesn't seem to me that they're all rolling around naked in all the great buying power brought to them by deflation. Does it to you? The wealthy lifestyles that Japan's economy once supported are mere shadows of their former selves. We may be next.
