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Inflation or deflation

40 posts in this topic

I hear some on this forum warn of inflation.

However,I heard a numbers guy state we are in for long term deflation.

Any of you numbers guys that can explain what exactly each one is, it's effect on the economy, and why he would warn of deflation?

Thank you.

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I really don't see how we can avoid inflation. We have more money than ever before in the game and the resource pie is continually shrinking. More $ for every bit of valuable resources on our planet every day equates to inflation at a base level.

We are in a period of deflation now because of the recessions immediate effects on labor and energy needs. Supply of real goods grossly exceeds supply on about everything. I don't see it lasting too long, maybe another year at best. Once the supply gets brought into line and energy markets plot their move towards greater rewards, this will end quickly. Again, in my opinion.

We're digging ourselves quite a hole.

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I've often wondered what inflation really means.

In my simple mind I usually thought it was a relationship between consumer prices and consumer income and so it worked something like this, in simple terms. When consumer prices increase faster than consumer income then you have inflation. Therefore, when income increases faster than consumer prices, deflation.

But then I struggle with the difference between economic growth, recession, and depression. I usually see these as a relationship between job opportuity and worker supply.

Most likely I'm way off the mark.

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Deflation is an increase in the real value of money - inflation is the opposite.

With the current spending and tax policy of the government, combined with the stale economy, my guess is we will be looking at stagflation - which is a combination of rising prices and stagnant economy..

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The great depression was a deflationary period.

japan has been in a deflationary period since the 1990's.

If i had to bet on either one for us, it would be inflation. When i don't know. but it has to come at some point.

It has to come with all the foreign financed debt.

it would be interesting to know what that guy on tv sees unless he is thinking long term recession or even depression. if we are going into a long term deflationary period, alot of gold owners won't be happy.But, those who have little or no debt, they are going to be content in a deflationary period. as you know americans are heavily in debt

Look at gold. the last time gold when up like this that i can recall was the 1970's. plus the pressure on the dollar and countries expressing a desire to move away from the dollar. whether they do or not remains to be seen.

BTW... be careful of those gold ads you here on the radio. gold isn't an investment, it's a hedge against inflation. If we at some point go into inflation, gold owners will be happy. but that's the only time,IMO, you will.

I have added gold to my IRA, plus emerging markets which are performing better than us but also have their own problems.

Either way, pay off debt.

Yes...DC, along with the states, are digging us a hole.

I see that the isrealis are working on a strike in iran. if that happens, watch oil prices. although the stagnation in the 1970's was also tied to oil supply since OPEC loved their embargos then and i don't think a rise in price if iran gets hit will be a result in supply but speculators going nuts

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Swamptiger got it right. Generally the Fed encourages slight inflation (low interest rates) to keep the economy moving. If you are in a state of deflation, its better to hold your money than spend it (as it is increasing in value by doing nothing).

We are in for another rough 12-24 months or so before we pull out of it.

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We are in for another rough 12-24 months or so before we pull out of it.

however, don't discount the "magic" that congress seems to determine to work on the economy with cap and tax, raising taxes, national health care,ect ect

the fed government would be better off doing nothing, IMO. let the economy go through it's pains an correct on it's own

more investors are heading to asia and giving the west a big thumbs down

When Chinese students know to laugh when geithner tells them the dollar is safe, imagine what the Chinese government thinks

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the fed government would be better off doing nothing, IMO. let the economy go through it's pains an correct on it's own more investors are heading to asia and giving the west a big thumbs down

TJ, doing nothing isn't an option, even for most conservatives (outside of Mark Sanford, of course).

There are massive disagreements on what, exactly, the gov't role should be in a time like this, but there's a strong consensus that lack of gov't action contributed mightily to the Great Depression.

Believe it or not, there are times whent he gov't shouldn't just lie prone in the road waiting for a street sweeper...

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Really??? what lack of government action??? that's a popular myth that hoover believed in laisse faire capitalism but the proposals and plans introduced and made law before and at the start of the crash of 1929 don't support that.

I'm curious were this strong consensus is.

Yes...doing nothing is better than doing the wrong thing

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TJ, if you'd read something other than news off of IBD or whatever that is you'd see some interesting things. smile

In case you're wondering, it was Bush (our last prez) who started this ball rolling, & his conservative economic advisers were unanimous in needing to do something to keep the economy from sliding into a black hole.

And re: the Depression, I didn't say the gov't did nothing; Hoover tried, in his "laisse faire" way if you want to put it that way, but his gov'ts actions were weak, late, & ineffective - which is why so many economists favored quick, overwhelming action this time.

I'm just very suspicious of those sturdy enough to believe that there's a set action that solves every problem. Less government is ALWAYS the answer. Bigger gov't is ALWAYS the answer. Less taxes is ALWAYS the answer. Submitting to the typical "gov't should stay out of the way" rant when history doesn't support that view, nor does almost any other gov't in the world, is clinging to a dogma that doesn't readily apply in this case.

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TJ, if you'd read something other than news off of IBD or whatever that is you'd see some interesting things. smile

In case you're wondering, it was Bush (our last prez) who started this ball rolling, & his conservative economic advisers (I can get you names if you need) were unanimous in needing to do something to keep the economy from sliding into a black hole.

And re: the Depression, I didn't say the gov't did nothing; Hoover tried, in his "laisse faire" way if you want to put it that way, but his gov'ts actions were weak, late, & ineffective - which is why so many economists favored quick, overwhelming action this time.

I'm just very suspicious of those sturdy enough to believe that there's a set action that solves every problem. Less government is ALWAYS the answer. Bigger gov't is ALWAYS the answer. Less taxes is ALWAYS the answer. Submitting to the typical "gov't should stay out of the way" rant when history doesn't support that view, nor does almost any other gov't in the world, is clinging to a dogma that doesn't readily apply in this case.

I was waiting for some reference to FOX, Limbaugh, the right, or something else. And you came through like gangbusters.

Recessions are corrective. hence, they should be allowed to happen.

Hoover was a big believer in big government and made no secrets about it throughout his presidency.

Yes. i know GWB started this. Obama is just a continuation

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Yes. i know GWB started this. Obama is just a continuation

On steroids...

it's the attitude in DC of, "we are smarter than you and without us you'd be lost."

Sadly, it's the attitude of both parties

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I was waiting for some reference to FOX, Limbaugh, the right, or something else. And you came through like gangbusters.

Recessions are corrective. hence, they should be allowed to happen.

I was waiting for some self-righteous defense, & you, as always, played your hand with perfect indignation.

Recessions are corrective? Really? I bet my grandpa, who lived through the worst of the Depression, would LOVE to hear that. Or are you making an exception for a depression? Oh, wait, how do you tell the difference until it's all over us? Oh, yeah, you can't.

Admit it TJ, there are just some situations where we actually need the gov't to step in & do something intelligent when the markets have F____d everything up. I know it's heresy, but it's true.

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I believe technically from an Economics standpoint they are considered a correction to a bubble. Its part of the natural cycle of a free market. Sometimes the economy grows, sometimes it doesn't. Overall our quality of life is second to none because of this system and the hard working people who are a part of it.

You could blame Bush. You could blame Barney Frank for pushing Freddie and Fannie to overstimulate the housing market. You could blame the Fed for keeping interests rates artificially low. You can play the blame game all you want on both sides of the ball, and you would probably be correct. Both sides played a major part in this recession by implementing bad policy.

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The question was about inflation or deflation. To me, deflation would be a good thing in a recession because it would put some purchasing power back in the dollar, and at the same time prices would naturally decline.

But the government won't allow it to happen - instead they want to pump up the money supply, inflate the dollar, and keep the economy going, thus creating another bubble and forcing prices up. I don't know for sure why - maybe to erase some of our debt through the devaluation of the dollar? It's a vicious circle anyway... crazy

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The question was about inflation or deflation. To me, deflation would be a good thing in a recession because it would put some purchasing power back in the dollar, and at the same time prices would naturally decline.

But the government won't allow it to happen - instead they want to pump up the money supply, inflate the dollar, and keep the economy going, thus creating another bubble and forcing prices up. I don't know for sure why - maybe to erase some of our debt through the devaluation of the dollar? It's a vicious circle anyway... crazy

In the short term, maybe. but the problem with deflation is that it discourages investment also because as prices get lower, so do profit margins and then companies may lay off folks

Like i said, if you have little or no debt it will work out great for you. How many americans do you know that are debt free?????

BTW...anybody read were CA wants to legalize pot to try to alleviate their budget woes. As much as i think the drug war is/was a farce, maybe CA needs to try to cut their budget first

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Deflation can be good for the consumer, but the flip side of that is that it hurts trade. Products we are trying to sell overseas would now have to cost more to foreign consumers. So its detrimental in that regard.

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In the short term, maybe. but the problem with deflation is that it discourages investment also because as prices get lower, so do profit margins and then companies may lay off folks

But at the same time, it would encourage saving, instead of spending, because your dollars would actually be increasing in value.

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In the short term, maybe. but the problem with deflation is that it discourages investment also because as prices get lower, so do profit margins and then companies may lay off folks

But at the same time, it would encourage saving, instead of spending, because your dollars would actually be increasing in value.

Yep.

That's why I have both cash and gold in my IRA. You never know.

Plus our debt level is low. just a mrtgage and my boat. Gotta have the boat. which was blown off the lake this morning

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Products we are trying to sell overseas would now have to cost more to foreign consumers.

That's probably the main reason. Anyway, you can just about bank on inflation...

Probably should have said you can just about count on inflation...

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Anyway, you can just about bank on inflation...

I think that's the trend. save for a few small rallies over time, the trend of the dollar is down. Combine that with the massive debt, the lopsided trade deficits.

I wish the original poster would be more specific or provide a link to why someone predicts long term deflation.

Guess that's why God invented google

Geez...we are becoming those guys that you used to laugh at in HS who never got girls and spend their Fri. nights talking about current events

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Recessions are corrective? Really? I bet my grandpa, who lived through the worst of the Depression, would LOVE to hear that. Or are you making an exception for a depression? Oh, wait, how do you tell the difference until it's all over us? Oh, yeah, you can't.

Your grandpa doesn't care. All he knows he lost his job and has a family to raise. he isn't interested in Austrian or keynesian economic theory, recession verses depression.

This is the danger. peoples' fears can be used as an excuse to expand government in downturns in the name of helping them which can make a bad situation worse

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