Quote from detective:
US economy is more likely to go the Weimar Republic post WWI Germany route than the Great Depression. We have an easy Fed, rigged inflation data, and every incentive to devalue the dollar from an American perspective, there is no way you will see deflation despite huge debts that won't be repaid.
This is opinion. There has been a lot more overall deflation in the world's past than hyperinflation. And most hyperinflation events were small countries or those with small ecomies. Germany after WW1 was an economically enfeebled country
And if the US goes under, what do you think will happen to the rest of the world? China, India, Philippines, etc.?
Commodity prices will contract rapidly and deeply, because demand will plunge. This is called DEflation. This is what the Depression was about. Petroleum is vastly overpriced. It wasn't too long ago that oil hit $13 a barrel. Most of what is keeping it up now is smoke and mirrors - expectations and war premium.
In the not too distant future, when wave energy, oil shale, methyl hydrates from the sea bottom, improvements to wind/solar energy, and other things come on the scene, there will be no such thing as peak oil. Technology leaps are coming faster than anyone can imagine. The Saudis will be trying to pawn off $15 a barrel oil.
Consider the following on Japan during there 1990s deflation. This sounds a lot more like what will happen to the US:
Deflation in Japan (wikipedia):
Deflation started in the early 1990s. The Bank of Japan and the government have tried to eliminate it by reducing interest rates (part of their 'quantitative easing' policy), but despite having them near zero for a long period of time, they have not succeeded. In July 2006, the zero-rate policy was ended.
Systemic reasons for deflation in Japan can be said to include:
* Fallen asset prices. There was a rather large price bubble in both equities and real estate in Japan in the 1980s (peaking in late 1989). When assets decrease in value, the money supply shrinks, which is deflationary.
* Insolvent companies: Banks lent to companies and individuals that invested in real estate. When real estate values dropped, these loans could not be paid. The banks could try to collect on the collateral (land), but this wouldn't pay off the loan. Banks have delayed that decision, hoping asset prices would improve. These delays were allowed by national banking regulators. Some banks make even more loans to these companies that are used to service the debt they already have. This continuing process is known as maintaining an "unrealized loss", and until the assets are completely revalued and/or sold off (and the loss realized), it will continue to be a deflationary force in the economy. Improving bankruptcy law, land transfer law, and tax law have been suggested (by The Economist) as methods to speed this process and thus end the deflation.
* Insolvent banks: Banks with a larger percentage of their loans which are "non-performing", that is to say, they are not receiving payments on them, but have not yet written them off, cannot lend more money; they must increase their cash reserves to cover the bad loans.
* Fear of insolvent banks: Japanese people are afraid that banks will collapse so they prefer to buy gold or (United States or Japanese) Treasury bonds instead of saving their money in a bank account. This likewise means the money is not available for lending and therefore economic growth. This means that the savings rate depresses consumption, but does not appear in the economy in an efficient form to spur new investment. People also save by owning real estate, further slowing growth, since it inflates land prices.
* Imported deflation: Japan imports Chinese and other countries' inexpensive consumable goods, raw materials (due to lower wages and fast growth in those countries). Thus, prices of imported products are decreasing. Domestic producers must match these prices in order to remain competitive. This decreases prices for many things in the economy, and thus is deflationary.
US economy is more likely to go the Weimar Republic post WWI Germany route than the Great Depression. We have an easy Fed, rigged inflation data, and every incentive to devalue the dollar from an American perspective, there is no way you will see deflation despite huge debts that won't be repaid.
This is opinion. There has been a lot more overall deflation in the world's past than hyperinflation. And most hyperinflation events were small countries or those with small ecomies. Germany after WW1 was an economically enfeebled country
And if the US goes under, what do you think will happen to the rest of the world? China, India, Philippines, etc.?
Commodity prices will contract rapidly and deeply, because demand will plunge. This is called DEflation. This is what the Depression was about. Petroleum is vastly overpriced. It wasn't too long ago that oil hit $13 a barrel. Most of what is keeping it up now is smoke and mirrors - expectations and war premium.
In the not too distant future, when wave energy, oil shale, methyl hydrates from the sea bottom, improvements to wind/solar energy, and other things come on the scene, there will be no such thing as peak oil. Technology leaps are coming faster than anyone can imagine. The Saudis will be trying to pawn off $15 a barrel oil.
Consider the following on Japan during there 1990s deflation. This sounds a lot more like what will happen to the US:
Deflation in Japan (wikipedia):
Deflation started in the early 1990s. The Bank of Japan and the government have tried to eliminate it by reducing interest rates (part of their 'quantitative easing' policy), but despite having them near zero for a long period of time, they have not succeeded. In July 2006, the zero-rate policy was ended.
Systemic reasons for deflation in Japan can be said to include:
* Fallen asset prices. There was a rather large price bubble in both equities and real estate in Japan in the 1980s (peaking in late 1989). When assets decrease in value, the money supply shrinks, which is deflationary.
* Insolvent companies: Banks lent to companies and individuals that invested in real estate. When real estate values dropped, these loans could not be paid. The banks could try to collect on the collateral (land), but this wouldn't pay off the loan. Banks have delayed that decision, hoping asset prices would improve. These delays were allowed by national banking regulators. Some banks make even more loans to these companies that are used to service the debt they already have. This continuing process is known as maintaining an "unrealized loss", and until the assets are completely revalued and/or sold off (and the loss realized), it will continue to be a deflationary force in the economy. Improving bankruptcy law, land transfer law, and tax law have been suggested (by The Economist) as methods to speed this process and thus end the deflation.
* Insolvent banks: Banks with a larger percentage of their loans which are "non-performing", that is to say, they are not receiving payments on them, but have not yet written them off, cannot lend more money; they must increase their cash reserves to cover the bad loans.
* Fear of insolvent banks: Japanese people are afraid that banks will collapse so they prefer to buy gold or (United States or Japanese) Treasury bonds instead of saving their money in a bank account. This likewise means the money is not available for lending and therefore economic growth. This means that the savings rate depresses consumption, but does not appear in the economy in an efficient form to spur new investment. People also save by owning real estate, further slowing growth, since it inflates land prices.
* Imported deflation: Japan imports Chinese and other countries' inexpensive consumable goods, raw materials (due to lower wages and fast growth in those countries). Thus, prices of imported products are decreasing. Domestic producers must match these prices in order to remain competitive. This decreases prices for many things in the economy, and thus is deflationary.