Funny ET members can't agree on whether there will be inflation or deflation ...

[allaboutmoney]

Quote from nutmeg:

but not much in the way of ideas to curb deflation.

if all else fails, the idea of a new currency shall save the economy, a fresh new start

 

[short&naked]

Quote from allaboutmoney:

US is not Japan, the economic problems are not the same either, so one can't expect the same outcome

Failing banks, an aging population, high debt to GDP ratio,...

Nope, nothing similar here.

 

[short&naked]

Quote from allaboutmoney:

maybe it's easier to predict the outcome for M0 based economies, and a bit harder for M1 based economies

and since our economy is M3 (maybe M4, lol) based, meaning it's made of cash, a large amount of credit and other complex securities, it is very difficult for one who doesn't have all the numbers to predict a reasonable outcome

?!

There are no M0 based economies (unless you count Liechtenstein LOL!), since this only constitutes the monetary base. The Fed can flood M0 with all the money it wants, unless credit is extended, the money will never reach into M1 and beyond into the broader economy. This is exacty what happeend in Japan. So what you say is incorrect. The same thing can happen in the U.S.

 

[sobemark]

http://www.nakedcapitalism.com/2009/02/steve-keen-roving-cavaliers-of-credit.html


supports the deflation theory which i believe

very long ... but required reading ...

 

[allaboutmoney]

Quote from short&naked:

There are no M0 based economies (unless you count Liechtenstein LOL!), since this only constitutes the monetary base. The Fed can flood M0 with all the money it wants, unless credit is extended, the money will never reach into M1 and beyond into the broader economy. This is exacty what happeend in Japan. So what you say is incorrect. The same thing can happen in the U.S.

I was giving that as an example

plus I didn't say the same thing can't happen in the US, I said it is highly likely that we will see double digit inflation rates within the next few years

yes there are some similarities between the current US economic conditions and Japan's prior economic situation but not every parameter is the same

 

[ChaosNSX]

Short bursts of deflation followed by a quick move towards inflation. You can't keep expanding the money supply like this forever and expect retention of value.

You can only squeeze the existing margins of suppliers of necessary goods so far down close to near cost.

 

[krazykarl]

ebb-and-flow.


we are deflating right no due to the lack of consumption. when the spending starts again inflation will be a beast.

 

[short&naked]

Quote from allaboutmoney:

I was giving that as an example

plus I didn't say the same thing can't happen in the US, I said it is highly likely that we will see double digit inflation rates within the next few years

yes there are some similarities between the current US economic conditions and Japan's prior economic situation but not every parameter is the same

an example that doesn't exist.

 

[Cesko]

Quote from jueco2005:

if the money supply has been increased there will be inflation

If productivity growth is 5% and money supply grows 5% there will be no inflation.

The only true real cure for current mess is the productivity growth. Think about how "stimulus bill" is going to to that. It won't.

 

[psytrade]

I work in an area where productivity has increased because of technology, but you'll find that it doesnt always create wealth.... it merely transforms the workplace.

This is all tied into how capital is created in the money system- the money flows into areas, some of which channel it vertically into their businesses, but my point is that new technology creates islands of wealth, not skyscrapers... In effect the economic system becomes more enslaved by the fact that the money supply is more volatile, and these businesses that exist in many ways only to channel and harness capital get hit the hardest.

While this structure is intially deflationary, you see how after several runs, things become inflationary as people prepare to isolate themselves from economic risks.