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| deflation; some questions | |
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| Tweet Topic Started: Nov 12 2008, 06:11 AM (555 Views) | |
| HoosierLars | Nov 14 2008, 11:09 AM Post #61 |
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Paper money and gold would be irrelevant if bartering was efficient. We only need "money" to facilitate trading, which accelerates growth and the creation of new "real" wealth. By federal decree, starting on a given date, every US$ could be worth $10, and that would result in inflation of about 10x on that day. Or it could go the other way just as easily. The US$ is what it is, and the Fed carefully controls the money supply to hold the value almost constant. Many expert economists have agreed that a SLIGHTLY inflationary monetary policy is the best one, and I'm certain they would agree that a SLIGHTLY deflationary policy would be ok too. However, deflation has the potential to snow ball, and lead to The Great Depression 2.0, and like UB said, very few want to go there. |
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| Mr Gray | Nov 14 2008, 11:31 AM Post #62 |
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so you do not agree that deflation is necessary to restore equlibrium to the economy? |
![]() The body knows what fighters don't: how to protect itself. A neck can only twist so far. Twist it just a hair more and the body says, "Hey, I'll take it from here because you obviously don't know what you're doing... Lie down now, rest, and we'll talk about this when you regain your senses." It's called the knockout mechanism. | |
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| HoosierLars | Nov 14 2008, 11:51 AM Post #63 |
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Aaron, I believe it is always necessary for overly-inflated assets to decrease in value. Assets like stocks have an underlying value based on corporate earnings, but the stock price is set by how much people are willing to pay on a given day, and if people get overly optimistic, they can become over priced. Practices like buying on margin (borrowed money) allows a market's increase to run even higher as people can margin even more. There's a big difference between some assets deflating in value and overall economic deflation. The later tends to freeze spending, and you have a race to the bottom, and potentially have a difficult time getting out of that hole. Much of our economy depends on people spending money for non-essential items, because the essentials can be produced by a relatively small % of our economy, due to its great efficiency. |
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| Mr Gray | Nov 14 2008, 01:03 PM Post #64 |
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but shouldn't an economy that has been over spending (see the credit crisis, amongst other examples) correct itself by retracting spending for a time to restore balance. Or should they just continue to overspend and create another bubble for the taxpayers to bail them out of? |
![]() The body knows what fighters don't: how to protect itself. A neck can only twist so far. Twist it just a hair more and the body says, "Hey, I'll take it from here because you obviously don't know what you're doing... Lie down now, rest, and we'll talk about this when you regain your senses." It's called the knockout mechanism. | |
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| HoosierLars | Nov 14 2008, 01:17 PM Post #65 |
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Aaron, you make an excellent point about general over-spending, and we have essentially been living on the credit from the rest of the world. If that bill is coming due now, frankly, it scares the shit of me, and I'm hoping there is a way to have a relatively soft landing. Maybe we do need a serious kick in the ass to change peoples way of thinking. So I guess that after this drawn out, circuitous thread, maybe I'm going to more or less agree with you. :D |
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| Mr Gray | Nov 14 2008, 01:43 PM Post #66 |
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all's well that ends well wtg |
![]() The body knows what fighters don't: how to protect itself. A neck can only twist so far. Twist it just a hair more and the body says, "Hey, I'll take it from here because you obviously don't know what you're doing... Lie down now, rest, and we'll talk about this when you regain your senses." It's called the knockout mechanism. | |
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| eelbor | Nov 14 2008, 02:24 PM Post #67 |
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I still disagree. Friggin socialists. ;) |
![]() "Liberal, shmiberal. That should be a new word. Shmiberal: one who is assumed liberal, just because he's a professional whiner in the newspaper. If you'll read the subtext for many of those old strips, you'll find the heart of an old-fashioned Libertarian. And I'd be a Libertarian, if they weren't all a bunch of tax-dodging professional whiners." - Berkeley Breathed Meat is Murder. Sweet, delicious murder. | |
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| Mr Gray | Nov 14 2008, 02:35 PM Post #68 |
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thanks for your share eel :getsome: |
![]() The body knows what fighters don't: how to protect itself. A neck can only twist so far. Twist it just a hair more and the body says, "Hey, I'll take it from here because you obviously don't know what you're doing... Lie down now, rest, and we'll talk about this when you regain your senses." It's called the knockout mechanism. | |
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| eelbor | Nov 14 2008, 02:37 PM Post #69 |
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It really isn't a holiday until your crazy Uncle Earl finishes off all the bourbon in the house and yaks on the cat, now is it? |
![]() "Liberal, shmiberal. That should be a new word. Shmiberal: one who is assumed liberal, just because he's a professional whiner in the newspaper. If you'll read the subtext for many of those old strips, you'll find the heart of an old-fashioned Libertarian. And I'd be a Libertarian, if they weren't all a bunch of tax-dodging professional whiners." - Berkeley Breathed Meat is Murder. Sweet, delicious murder. | |
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| HoosierLars | Nov 14 2008, 02:42 PM Post #70 |
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We still need to sort out what Aaron meant when he said wealth wasn't created. You and I both strongly disagree with his position on that. Aaron, did the simple example of a group of people creating their wealth out of nothing make you see our point of view better? Back on topic, the main question here is how this deep recession will play out. Given that the government doesn't want a depression, and we have strong Democrat (with a big L) control of the federal government, I agree with UB, and the government will print us out of deflation if necessary. That means cash will be shit, unlike the 1930's when cash was king. To keep this post's partisan content up to the minimum allowed value, this bad economy is great for liberals, because it will give them a good excuse to start nationalizing the housing and auto industries. Add health care and wealth redistribution using tax cuts, *cough* welfare payments *cough*, and you have a wonderful era for the liberals in this country. Fortunately, they will over reach (again) and Joe the Plumber's friends will be embarrassed to admit they voted for The Messiah and his liberal cohorts. |
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| Mr Gray | Nov 14 2008, 02:45 PM Post #71 |
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as I said, if you are equating wealth with quality of life/standard of living then certainly it can increase and has. If you are equating wealth with money, then there is a finite amount, which is what I was referring to as the context of this coversation was originally deflation/inflation |
![]() The body knows what fighters don't: how to protect itself. A neck can only twist so far. Twist it just a hair more and the body says, "Hey, I'll take it from here because you obviously don't know what you're doing... Lie down now, rest, and we'll talk about this when you regain your senses." It's called the knockout mechanism. | |
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| HoosierLars | Nov 14 2008, 03:01 PM Post #72 |
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:banghead: The amount of money put into circulation should roughly correspond to the amount of wealth a society possesses. So if the wealth doubles, the amount of money should double too. This will result in a currency's value maintaining a consistent "buying power." |
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| Mr Gray | Nov 14 2008, 03:34 PM Post #73 |
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hmmm......well, then I assume that you are 100% against every US monetary policy of the lat 100 years then right, considering our dollar is worth a small fraction of the buying power it once was? |
![]() The body knows what fighters don't: how to protect itself. A neck can only twist so far. Twist it just a hair more and the body says, "Hey, I'll take it from here because you obviously don't know what you're doing... Lie down now, rest, and we'll talk about this when you regain your senses." It's called the knockout mechanism. | |
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| HoosierLars | Nov 14 2008, 04:06 PM Post #74 |
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I think someone posted that the US$ has lost 95% of its value over a long time period, maybe about a hundred years? (please correct if I'm off too much) Compounded annually, this represents less than 1% inflation per year, which is pretty close to perfection. The reason people fret so much about it is they are imagining how much buying power they would have if bread was still ten cents per gallon, etc. Our wealth has increased, but not enough for everyone to live like kings. In many ways, the middle class does live better than kings did 100 years ago. We have fresh veggies/fruit year round, air-conditioning, cars, cable TV, computers, etc. |
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| eelbor | Nov 14 2008, 05:05 PM Post #75 |
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Napoleon III used aluminum tableware at state dinners, and gave aluminum ornaments as gifts. The value of aluminum was so high that only the most wealthy could even contemplate its use. This Wöhler process used to refine aluminum was laborious and expensive. The cost of aluminum in 1855 was $113 per pound. Now you can get a pound for a little over a dollar. |
![]() "Liberal, shmiberal. That should be a new word. Shmiberal: one who is assumed liberal, just because he's a professional whiner in the newspaper. If you'll read the subtext for many of those old strips, you'll find the heart of an old-fashioned Libertarian. And I'd be a Libertarian, if they weren't all a bunch of tax-dodging professional whiners." - Berkeley Breathed Meat is Murder. Sweet, delicious murder. | |
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