Quote from Martinghoul:
There's no need to insult me, first and foremost. I don't remember when I ever treated you disrespectfully. Secondly, can you explain to me exactly how deflation is bad and inflation is good for the banks?
Thirdly, your logic doesn't make a lot of sense. We've made it all the way here in spite of many things, like, for instance, the dreaded bubonic plague. Does this mean that bubonic plague is OK, in the grand scheme of things? It's an exaggeration, but you get the idea.
Finally, as to prices and not wages being sticky, remember that we're talking about "deflation" here. "Deflation" is defined as a prolonged and widespread fall in prices of goods and services. If you look at what happens during periods of deflation, such as Japan during the 2000s and Hong Kong after the Asian crisis, you'd see that real wages actually fall, i.e. nominal wages fall faster than prices do. And yes, I know that high inflation lowers living standards, but, based on available empirical evidence, the same goes for deflation.
Finally, I've said it before and I'll say it again. I DON'T work for a bank or an investment bank or a central bank or any bank (not that there would be anything wrong with it).
Why is it you insist on testing peoples knowledge when you know full well they're right? That condescending attitude is an insult, and one deserves another, yea? We both know full well capital requirements are impacted negatively by declining book values of paper assets (deflation), which is magnified by leverage. So instead of playing dumb, which is dumb in itself and counterproductive to a productive discussion, lets just get on with it?
Why don't you answer any of my questions, btw? I asked you a few, yet you want only yours addressed? Why did 2008 happen? Was deflation not a major threat to the banking system? How did humanity not only survive,
but thrive in spite of the hundreds, if not thousands, of deflations that have occurred over thousands of years of civilization? Shouldn't we all be dead by now, according to you, Krugman and other deflation scare mongers?
I really have to question your knowledge at this point, because it seems to me you lack some basic understanding of economics. Technological and productive improvements allow the creation of cheaper products, over time. Given a static currency value, prices deflate over time. Not inflate. That's how the system is supposed to work. Deflation IS NATURAL and a consequence of technological progress. So to say it's bad, is really silly and dumb.
To wit, the context to which your implying (I hope), is that deflation is bad after a bubble - ie after a huge run up in some asset class. IOW, the popping of a bubble is bad. Not progressive technological improvement. Again, your wrong.
Take Japan. Their deflation is not a bad thing. It's a normal thing. Their stock market tripled. And real estate prices quadrupled. Prices have to return to original levels before growth can begin anew. That's how it works. That's how it's always worked. Artificially inflating the FIRE sector at the expense of the rest of the economy does nothing but decrease living standards for the whole, while shielding a politically protected class from insolvency of their own doing. Do you not admit that? Or is it "normal" to print Zim notes by the trillion, explode the stock market 10,000%, and then sustain that level, because.....well, a return to original values would hurt the rich? Of course, the middle and lower class get eviscerated, since they dont own any assets. But who cares, right?
What exactly is your argument?
