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Why is deflation bad?
- Thread starter noob_trad3r
- Start date
Deflation is an EFFECT of a bad economy, not a cause.Quote from noob_trad3r:
http://online.wsj.com/article/SB100....html?mod=WSJ_hpp_MIDDLENexttoWhatsNewsSecond
Shouldn't deflation be a good thing, a natural correction in prices that were too high to begin with? How does it make sense to have an inflation only policy?
Since the US is entering an era of low wage service McJobs why is it wrong for the cost of living and housing to go down accordingly to meet wages?
But I have yet to experience this deflation.
When the economy is real bad, people must sell at really low prices (often below cost), in order to be able to sell.
How much more would you suggest that they lower taxes for the poor? As it they pay nothing.
With regard the rich: How high do you believe is fair?
With regard the rich: How high do you believe is fair?
Quote from morganist:
Yeah you are right. The government could lower taxes for poor people and increase for wealthy this would keep income the same but increase money.
Try pushing a string into a hole.
Quote from noob_trad3r:
http://online.wsj.com/article/SB100....html?mod=WSJ_hpp_MIDDLENexttoWhatsNewsSecond
Shouldn't deflation be a good thing, a natural correction in prices that were too high to begin with? How does it make sense to have an inflation only policy?
Since the US is entering an era of low wage service McJobs why is it wrong for the cost of living and housing to go down accordingly to meet wages?
But I have yet to experience this deflation.
Quote from zdreg:
that is what a business cycle is about. a business cycle exists to wipe out the previous excesses and misallocations of resources. governments don't believe this. they continue to inflate bubbles till eventually there is a large bubble that gov'ts cannot prevent from busting. then the pain is much greater than if natural forces had prevail.
that is why since the fedral reserve has been created the US has suffered from inflation. in the period before the creation of the Fed the US had price stability.
You call this price stability?!
Source: wikipedia
Attachments
Quote from olias:
with deflation, the economy goes in the tank. People stop spending and buying stuff. Very bad
People have been living way beyond their means, spending way too much money loading up on shopertainment instead of spending time with family and doing stuff like social interaction and ending up with huge debts.
This is a correction, the days of spending 200% income is done.
I think the Last bubble has popped, with the exception of the college bubble.
I can't be fucked to read the whole thread -I just read the OP. I have a question for noobtrader. Do you live in America?
If you do and haven't noticed how $1 will buy twice the merchandise that it would a couple of years back then you are getting ripped off.
Deflation is a fantastic thing for savers and people not stupid enough to gamble on stocks and make the likes of the criminal Jim Cramer rich.
What makes me laugh is that the governments have declared war on savers, but you know what -holding cash has been the best trade for more than a few years unless you are extremely lucky or some kind of genius.
If you do and haven't noticed how $1 will buy twice the merchandise that it would a couple of years back then you are getting ripped off.
Deflation is a fantastic thing for savers and people not stupid enough to gamble on stocks and make the likes of the criminal Jim Cramer rich.
What makes me laugh is that the governments have declared war on savers, but you know what -holding cash has been the best trade for more than a few years unless you are extremely lucky or some kind of genius.
Quote from GuyFawkes:
I can't be fucked to read the whole thread -I just read the OP. I have a question for noobtrader. Do you live in America?
If you do and haven't noticed how $1 will buy twice the merchandise that it would a couple of years back then you are getting ripped off.
Deflation is a fantastic thing for savers and people not stupid enough to gamble on stocks and make the likes of the criminal Jim Cramer rich.
What makes me laugh is that the governments have declared war on savers, but you know what -holding cash has been the best trade for more than a few years unless you are extremely lucky or some kind of genius.
Unfortunately, the USA is not a "saving" country. You know who is? China. Who benefits from deflation and who suffers? How do you pay back trillions of dollars of debt when the currency value is increasing?
Quote from GuyFawkes:
I can't be fucked to read the whole thread -I just read the OP. I have a question for noobtrader. Do you live in America?
If you do and haven't noticed how $1 will buy twice the merchandise that it would a couple of years back then you are getting ripped off.
Deflation is a fantastic thing for savers and people not stupid enough to gamble on stocks and make the likes of the criminal Jim Cramer rich.
What makes me laugh is that the governments have declared war on savers, but you know what -holding cash has been the best trade for more than a few years unless you are extremely lucky or some kind of genius.
Can you give some examples.
#1 Food more expensive than 10 years ago.
#2 Fuel more expensive than 10 years ago.
#3 Healthcare more expensive than 10 years ago.
#4 Transportation more expensive than 10 years ago.
#5 College more expensive than 10 years ago.
Housing is starting to correct but still more expensive than 10 years ago thanks to the Oversized McMansions.
Yet wages have not tracked the increasing cost of living and the cost of education to attain a job, so what did people do? Borrow to make up for the spread.
Now that credit is shrinking and Americans waking up to the fact that spending and spending with borrowed money makes no sense.
Americans can declare bankruptcy to get out of this debt when deflation continues. And in fact lots of Americans are walking away from mortgages.
My prediction is Deflation followed by Weimar Hyperinflation when the US is desperate to meet its debts to the world so just like Germany, they will run the presses and print dollars left and right.
Phase #1 is beginning (Deflation)