All things in the universe have a good and a bad side, axiomatically. It depends which one affects you or which one you need. Bastardized capitalism as in the US and Oligarchic socialism in Europe are the two opposites, Bastardized capitalism likes inflation and Oligarchic socialism likes deflation. Hence, the conflict between the US and Germany in executing monetary policy. Simply put, when deflation occurs, cash is king and the Oligarchs of Europe thrive, they buy everything, whilst they enforce a police state. This is not what US likes because things can get out of control. The choice has to do with how you control the masses basically. US and China will choose inflation and Europe deflation.
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Why is deflation bad?
- Thread starter noob_trad3r
- Start date
All things in the universe have a good and a bad side, axiomatically. It depends which one affects you or which one you need. Bastardized capitalism as in the US and Oligarchic socialism in Europe are the two opposites, Bastardized capitalism likes inflation and Oligarchic socialism likes deflation. Hence, the conflict between the US and Germany in executing monetary policy. Simply put, when deflation occurs, cash is king and the Oligarchs of Europe thrive, they buy everything, whilst they enforce a police state. This is not what US likes because things can get out of control. The choice has to do with how you control the masses basically. US and China will choose inflation and Europe deflation.
M
morganist
Quote from zdreg:
it would not. the wealthy pay most of the taxes now. if you increase their taxes substantially they will not work. if you tax at 90% on the margin a skilled surgeon who works 60 hours a week he will work 50 hours or 40 hours. are u going to put a gun to his head and force him to operate?
maybe some people in the US government would.
the bottom line is that deflation is good for a country as it wrings out the excesses of the previous business cycle. governments are against deflation because everyone can see the results of their mistaken policies while inflation causes people to think that the party is never ending.
I think the alteration needed to fix the deflationary gap would have little affect. I also think the business cycle idea prevents the recovery. Deflation makes borrowing costly that in turn prevents recovery.
Quote from Random.Capital:
If there is an actual need for those 10-20 extra hours, somebody else will gladly fill it for the privilege of earning an income that puts them in the top tax bracket.
Sadly that other person will be precluded from competing. The easiest way to make a great deal of money is to enjoy a monopoly or be a member of a cartel and be selling a service that your customer can't refuse.
Quote from zdreg:
... the wealthy pay most of the taxes now.
That would depend on how you define wealthy. To fall in the top 1% of incomes you need an income of a little over 400K/year. People with incomes below this amount pay about 60% of the government's income tax revenue and those in the top 1% pay the other 40 %.
/www.taxfoundation.org/news/show/250.html
It is somewhat of a myth that the poor pay no income taxes as long as we agree to include the indirect inflation tax in the total of what they pay to the government out of their income. No one, not even the poor, escapes the inflation tax!. There is little difference between the government reaching into my pocket and taking a dollar versus making the ten spot in my pocket buy only 9$ worth of stuff. But obviously one method of grabbing that buck is far more politically savvy then the other.
So much talk about Deflation now in the news. I still think Deflation is needed since our products come from china.
Quote from Kassz007:
And you still don't understand the economics of deflation.
Well I do not see the problem if Nike shoes are made in china, they should not cost 50 dollars for a pair.
If a GM auto is made in mexico, it should be cheaper not more expensive.
All this stuff made in China,india,mexico should be cheaper not more expensive.
Quote from noob_trad3r:
Well I do not see the problem if Nike shoes are made in china, they should not cost 50 dollars for a pair.
If a GM auto is made in mexico, it should be cheaper not more expensive.
All this stuff made in China,india,mexico should be cheaper not more expensive.
There is so much more to deflation than the cost of your Nike shoes...it is certainly not simply about consumer prices contracting.
By the way, if those same Nike shoes were made in the USA they would cost you even more.
Quote from Kassz007:
There is so much more to deflation than the cost of your Nike shoes...it is certainly not simply about consumer prices contracting.
By the way, if those same Nike shoes were made in the USA they would cost you even more.
How so? Those 50 dollar nikes cost 2 bucks a pair total, 48 dollar profit.
Made in the USA lets say the cost to build etc.. is 30 dollars, they can still sell for 50 and pocket 20 bucks.
But sell more Nikes because people have jobs and can afford them.
Sort of like the Henry Ford philosophy.
The only reason prices stayed where they have been is due to extreme credit expansion. Thats done, Americans are tired of the ratrace.
Quote from morganist:
I think the alteration needed to fix the deflationary gap would have little affect. I also think the business cycle idea prevents the recovery. Deflation makes borrowing costly that in turn prevents recovery.
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.