Where's deflation ? The Fed's double standard

[Kassz007]

Quote from jueco2005:

Sure...........can you tell me what deflation and inflation are??

Answering a question with a question.....awesome.

Google your high school bullshit definitions.

 

[jueco2005]

Quote from Kassz007:

Answering a question with a question.....awesome.

Google your high school bullshit definitions.

no smart guy. we needed to start from there because i think we understand differently both concepts.

inflation and deflation are increases in the money supply or decreases in the money supply.

rising prices or declining prices has nothing to do with inflation and deflation.

Prices going down or up......are not universally a good or a bad thing. The cause of going in either direction let us know if it is a positive sign or a negative one.

I hope my understanding on this matter helps you when you Google your stuff.

 

[Kassz007]

Quote from jueco2005:

no smart guy. we needed to start from there because i think we understand differently both concepts.

inflation and deflation are increases in the money supply or decreases in the money supply.

rising prices or declining prices has nothing to do with inflation and deflation.

Prices going down or up......are not universally a good or a bad thing. The cause of going in either direction let us know if it is a positive sign or a negative one.

I hope my understanding on this matter helps you when you Google your stuff.

Great. You've laid out brief definitions of inflation and deflation.

Now please explain to me how my analysis of a deflationary period is wrong. I don't think you can, because I think my analysis is correct.

Hint - there is a reason why central banks have an inflation target of 0%-2%. And it's not so government can control our lives through inflation.

 

[jueco2005]

Quote from Kassz007:

And it's not so government can control our lives through inflation.

Well I am speechless. from this moment on you speak English and I Russian.

 

[Martinghoul]

I am with Kass on this, in terms of the dangers of deflation...

Moreover, defining inflation/deflation as change in money stock (which aggregate, btw?) is completely misguided, in my view. Especially so in a global modern economy.

 

[Kassz007]

Quote from jueco2005:

Well I am speechless. from this moment on you speak English and I Russian.

LOL my mistake. I didn't realize I was dealing with one of those government conspiracy types. I guess all central banks are in on this scam together, and have been for a very long time...

Kudos to you for discovering their covert plan.

 

[Daal]

There is no Fed double standard, they never claimed there was deflation(Just mentioning this word would roil the markets), IIRC all they talked about was that there were risks prices would stay below what could be considered 'price stability'

 

[Kassz007]

Quote from Martinghoul:

I am with Kass on this, in terms of the dangers of deflation...

Moreover, defining inflation/deflation as change in money stock (which aggregate, btw?) is completely misguided, in my view. Especially so in a global modern economy.

Indeed. A more accurate definition would to simply say increasing/decreasing asset values. Both of which can be combated through monetary policy, of which money supply is a tool.

 

[piezoe]

Quote from nazzdack:

1) It's mostly real and not a fraud.
2) Deflation, during a bull market, can be good.
3) Deflation, during a bear market, can be bad.
4) The "problem" is that deflation will eventually impact the value of everything, not just the things you want it to impact.

Deflation for a debtor nation that owes most of its debt to foreign entities is a disaster. It would result in returning to your creditors more buying power than you borrowed. In a nation of savers (Japan), where the creditors are largely internal, deflation is not as onerous. In the US, however, it would be disastrous, and so the Fed will see to it that we have ample inflation. We will not have deflation in the US (barring a total collapse of course, which is always a possibility, but not very likely.)

Inflation is a godsend to debtors with long term fixed rate loans.

 

[PlusMinus]

Quote from Kassz007:

Electronics are a different animal. But you can't compare a consumer rushing out to spend a few hundred bucks on a new iPhone to consumers delaying purchases of cars and houses.

You're right, wages don't decrease at the same rate. Instead, the employees are laid off.

The problem with deflation is that it quickly creates a downward spiral. It's easy to say deflation for a year would be a good thing. In reality, that doesn't usually happen. Less demand = lower prices. As long as demand (price) continues to decline, consumers will wait to make their purchases. This in turn causes even lower demand...and the spiral continues. This spiral can be very difficult to break. Since such a large portion of economic activity is consumer driven, deflation seriously damages overall economic activity.

Right on. And also worth pointing out that deflation is usually in tandem with increased currency value, which can hurt an export driven economy, which the U.S. is obviously not. Just sayin'.