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No, Deflation Is Not A "Danger"

Tyler Durden's picture




 

Submitted by Pater Tenebrarum of Acting-Man blog,

The 'Deflation Danger' Should Abate …

What is it with this perennial fear the chief money printers have of falling prices? Not that we are likely to see it happen, but if it does, what of it? Bloomberg reports on the recent ECB decision with the following headline: Draghi Says Deflation Danger Should Abate as Economy Revives

The headline alone is a hodge-podge of arrant nonsense. First of all, 'deflation' (this is to say, falling prices), is not a 'danger'. Speaking for ourselves and billions of earth's consumers: we love it when prices fall! It means our incomes go further and our savings will buy more as well. What's not to love?

The problem is of course that when prices decline, the 'wrong' sectors of society actually benefit, while those whose bread is buttered by the inflation tax would no longer benefit at the expense of everybody else. But they never say that, do they? Has Draghi ever explained why he believes deflation to be a danger? No, we are just supposed to know/accept that it is.

Secondly, the 'as economy revives' part makes no sense whatsoever. Why and how should a genuinely reviving economy produce inflation? Economic growth occurs when more goods and services are produced. Their prices should, ceteris paribus, fall (of course, we are not supposed to inquire too deeply into which ceteris likely won't remain paribus if Draghi gets his wish).

 

From Bloomberg:

 

“ European Central Bank President Mario Draghi signaled that deflation risks in the euro region are easing for now after new forecasts showed that inflation will approach their target by the end of 2016.

 

The news that has come out since the last monetary policy meeting are by and large on the positive side,” he told reporters in Frankfurt today after the central bank kept itsmain interest rate at 0.25 percent. He also indicated that money markets are under control at the moment, lessening the need for emergency liquidity measures.

 

Draghi is facing down the threat of deflation in an economy still recovering from a debt crisis that threatened to rip it apart less than two years ago. New ECB forecasts today underscore his view that the 18-nation bloc will escape a Japan-style period of falling prices as momentum in the economy improves.”

 

(emphasis added)

We have highlighted the sentence above because we keep reading about the 'Japan-style deflation trap' for many, many years now. You would think that Japan was a third world country by now the way this keeps being portrayed as a kind of monetary evil incarnate that destroys the economy. Of course, nothing could be further from the truth.

 

Inflation is Not Equivalent to Economic Growth

'Inflation' is not the same as 'economic growth' – on the contrary, it both causes and frequently masks economic retrogression. How much inflation has there been in the euro area over time? Let's have a look.

 


 

Euro Area TMS-a

The euro area's true money supply since 1980. One can only shudder at this depiction of 'deflation danger' in action – click to enlarge.

 


 

What about prices though? Let's have a look-see:

 


 

HCPI-LT-wow chart

Since 1960, there was exactly one year during which prices according to the 'CPI' measure actually fell, namely in 2009, by a grand total of 0.5% – click to enlarge.

 


 

As Austrian economists have long explained, it is simply untrue that prices must rise for the economy to grow. Consumers obviously benefit from falling prices (only Keynesian like Paul Krugman don't realize that, as their thought processes are evidently unsullied by logic and/or common sense). All of us can easily ascertain how beneficial the decline in computer prices, cell- and smart phone prices, prices for TV screens, etc. is. Naturally, it would be even better if all prices fell, not only those on a select group of consumer goods.

What about producers? Won't they suffer? By simply looking at the share prices and earnings of the companies that make all the technological gadgets the prices of which have been continually declining for decades, everybody should realize immediately that the answer must be a resounding NO. This is by the way not only true of the firms that are in the final stages of the production process, i.e. the stages closest to the consumer. It is obviously also true for the firms in the higher stages of the capital structure. But why? It is quite simple actually: prices are imputed all along the chain of production. What is important for these companies to thrive are not the nominal prices of the products they sell, but the price spreads between their input and output.

In fact, the computer/electronics sector is the one that comes closest to showing us how things would likely look in a free, unhampered market economy.

Of course, in said free, unhampered market economy, Mr. Draghi and a host of other central planners would have to look for a new job.

 

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Fri, 03/07/2014 - 19:52 | 4523394 DoChenRollingBearing
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A dangerous and plausible scenario is deflation first, then hyperinflation.  

 

Beware and prepare™

Fri, 03/07/2014 - 20:03 | 4523426 Goatboy
Goatboy's picture

With deflation everything falls, including prices *and* wages. Everything shrinks and societal dynamics start digressing towards feudalism and beyond.

Stupidity of this article could only be excused if its propaganda meant to topple western narrative and dominance. Toppling of US's "socialism for the rich" is probably most likely from libertardian ignorance perspective which has its sick roots deep into American psyche.

Fri, 03/07/2014 - 20:05 | 4523439 LooseLee
LooseLee's picture

Please LEARN that deflation is NATURAL and Inflation is MAN MADE.

Fri, 03/07/2014 - 20:08 | 4523446 National Blessing
National Blessing's picture

Deflation isn't a problem--unless you are heavily invested in gold.  Then deflation sucks giant ass.  Bitches.

Fri, 03/07/2014 - 20:26 | 4523488 DoChenRollingBearing
DoChenRollingBearing's picture

Gold did very well in the Great Depression, IIRC.  

Korean bearings will do well in our Great Depression v. 2.

Fishez.

 

(fun blog)

Fri, 03/07/2014 - 20:43 | 4523558 Occident Mortal
Occident Mortal's picture

Deflation is very bad news when you are $17 trillion in debt.

It causes the debt to GDP ratio to gape, and more importantly...

The cost of servicing the debt to GDP ratio becomes more and more burdensome.

Fri, 03/07/2014 - 20:57 | 4523600 bugs_
bugs_'s picture

here in the Deflationists' Lounge we think that when you are $17 Trillion in debt that is the moment Deflation will come callin'

Fri, 03/07/2014 - 21:09 | 4523628 DoChenRollingBearing
DoChenRollingBearing's picture

Occident, bugs,

There is essentially nothing we can do as individuals re our national debt.  But we can take care of our own debts.  

GOTS (Sinclair´s "Get Out of The System"), get out of debt and get into gold.

Look out for you and yours.  

You two and I are unable to save the rest.  

Fri, 03/07/2014 - 23:40 | 4524075 mumbo.jumbo
mumbo.jumbo's picture

There's one important thing you can do: call it properly their debt. I wasn't there, didn't promise anything, didn't have any influence... so, it's their debt, not mine. And I highly suspect the same applies to you.

Sat, 03/08/2014 - 07:18 | 4524547 negative rates
negative rates's picture

It was the money printers job to maintain stable prices. Price controls folks not price inflation, instead they elimainated that like a station wagon, took on a full employment mandate, and have been trying to improve on that,  now all but 3 of us have a killer pain in the neck and it's dog eat dog over money.

The worst [which is happening right now] is a monetary deflation, (or we here at home have not enough money to spend on the things we need). While at the same time hyperinflation exists, (which is, other foriegn countrys citizens have plenty of money to spend,  that keeps prices high, or price inflation). The conclusion is we don't have much money, but prices stay high here, because other countrys have plenty of money. So basicly we got lied to again about how much those Chinese were making as they became the machine of the world, so why did we send those jobs overseas again, to please the dry powder straight A  students in their relentless effort to control the world and it's finances.

Sat, 03/08/2014 - 08:55 | 4524635 jbvtme
jbvtme's picture

it's 1975...i pay $150/mo rent. own a newish car for $3500. gas $.57. i make $25/hr as a carpenter (although i can only find work may thru october).  today...rent $1200. car $35,000. gas $4. carpenter's wage $50/hr.  my call is deflation, especially in real estate.

Sat, 03/08/2014 - 07:59 | 4524591 Seb
Seb's picture

But you can't eat bearings (nor gold)!

:)

Sat, 03/08/2014 - 10:13 | 4524720 nickels
nickels's picture

Inflation is the vig orchestrated by the military-industrial complex.

Fri, 03/07/2014 - 23:09 | 4523993 TheReplacement
TheReplacement's picture

NSA paycheck?

Sat, 03/08/2014 - 05:55 | 4524505 MeelionDollerBogus
MeelionDollerBogus's picture

Wages per hour and hours workable (on offer from employer) are already dropping like a rock. You actually think it can get worse? There's a record number of people getting a wage of ZERO. You think that can go lower? Tell me how, genius.

Fri, 03/07/2014 - 20:19 | 4523465 Poor Grogman
Poor Grogman's picture

Deflation against what though?

The only meaningful metric would be one where fiat gains value in terms of gold, this has already been going on since gold nearly hit 2000.

For this type of " deflation" to continue, is a bit of a stretch I think, unless deliberately set into motion by a tightening of the money supply, (volker)

Yes a type of controlled deflation could be orchestrated while central planners have the keys to the fiat money tree, but the political pressure against such a thing would be immense ( japan).

The fact is that the planners have control of the money supply, but do not have much control of the commodity supply, therefore everything must be viewed in those terms.

I see Inflation as far as the eye can see, with isolated and overhyped bouts of lower inflation, which eventually lead into runaway inflation as resource extraction cost pressures eventually become overwhelming.

Still plenty of opportunities while the process unfolds though.

Fri, 03/07/2014 - 21:25 | 4523660 NoDebt
NoDebt's picture

In a fractional reserve banking system you can most definitely have deflation even if there is no change to the base money supply.  That's part of what happened in 2008.  The other part being the much more sinister collapse of a (theoretically) infinite asset rehypothecation chain.  One is limited in its multiplication abilities by the reserve ratio requirement, the other has (again, theoretically) no limits.  When either one or both of those things start to back up the levererage effect goes into revers and money is "destroyed", potentially causing deflation.

 

Fri, 03/07/2014 - 22:46 | 4523923 Poor Grogman
Poor Grogman's picture

Agree that 1930 style deflation is a theoretical possibility,

However the reality is that we live under a centralised money control system. So strong sudden and unexpected deflation would result in ctrl-p being used, therefore, although not certain, we may just see a continuation of more patchy weak deflation in geared assets ( such as stocks housing and retail) against a backdrop of increasing commodity, and food price inflation.

There is always a black swan possibility, but outside one of those, our present ridiculous monetary system, seems to work quite well as a wealth transfer mechanism for the elite, and therefore will continue until all real wealth has been co-opted into feeding the machine either as a form of collateral for rehypothecation. Or as taxable income that can be hit from multiple taxation directions.

Either way, for the individual, gold wins in the end.

Fri, 03/07/2014 - 23:15 | 4524011 TheReplacement
TheReplacement's picture

What happens when the wealth transfer system can no longer pay the salaries of those who facilitate it withouth digging into the wealth that has been accumulated by TPTB?  There has be be some % of potentialities where gold has no bearing at all.  Don't forget brass, lead, and seeds.

Sat, 03/08/2014 - 03:34 | 4524428 Poor Grogman
Poor Grogman's picture

Gold will only facilitate trade, and thus allow a functioning economy, with savings, and people who specialise in trades that do not directly put food on the table.

If there is no functioning economy of any sort, then gold is no use whatsoever.

But it is hard to imagine a total cessation of economic activity. It is easy to imagine a failure in localised areas, but regions, countries, and groups will all fare differently.

Gold will undoubtedly be accepted somewhere, and those places where it is accepted will be the places where you will want to be living, as there will be goods to buy and sell, and work for those people who have skills.

Economically, it is possible to imagine, that once gold is mobile again and circulating freely, a new form of more stable economy could quickly flourish.

Brass lead and seeds will always have value, ( except if weevils get into the seeds that is).

Sat, 03/08/2014 - 05:54 | 4524502 MeelionDollerBogus
MeelionDollerBogus's picture

Well, almost, but like Congress delegated money-making powers to the Federal Reserve, they abdicated total control to partial control so that issuance of credit (e.g. loans) now belongs with minion-banks like Goldman & JP Morgan, with the added twist they are also partial controllers of the Fed. See, any time they aren't 100% on the same page as each other, like just a misunderstanding or a miscalculation, they can each play a role in causing a collapse.

Causing collapse is easier than you think. It's not like a black swan is something unlikely.

These are fuckers drunk on power & free money playing Jenga by shooting at the blocks with pellet guns and someone's had a line of coke with their (tall) glass of Jack and has decided it's time to use a .45 instead of a pellet gun.

When that Jenga game fails as they all do, that's your black swan. So who did the line of coke? Jamie "I'm Richer than You are" or maybe it's Lloyd "Doing God's Work" Blankfucker...

These are people made careless by easy rides & immunity. That means they don't give a flying fuck if the monkeys run out of bananas as long as they keep what's around their local protection grid in stable formation.

They normally wouldn't be so dumb but when you take away all other predators & they don't even have to hunt hard for their meals, as with anything in nature, you start to get slow, fatter animals.

You know how nature (not people but nature itself) loves them slow animals.

OM, nom.

No, we won't do well out of this. But it's as good as done.

Sat, 03/08/2014 - 04:23 | 4524464 MeelionDollerBogus
MeelionDollerBogus's picture

Volcker's era didn't have all these derivatives.

There's one key new advantage: if someone wants massive deflation that person need only crash all the derivatives & to do the most damage to assign them fiscal liability inside of pension plans, bank accounts & the total balance sheets of various nonTBTF banks.

That would simultaneously deflate the money supply by 0.1 to 0.8 quadrillion & would leave the most powerful untouched.

Sat, 03/08/2014 - 10:12 | 4524717 daxtonbrown
daxtonbrown's picture

Even more likely is raisin muffin inflation AND deflation - i.e. biflation.

GDP = M * V

What you get is inflation of everything you need with concurrent crushing of monetary velocity. Business just grinds to a halt and wages and income falls. The worst of all worlds, a Biflationary depression.

http://www.futuramics.com/biflation.php

Fri, 03/07/2014 - 19:55 | 4523405 LetThemEatRand
LetThemEatRand's picture

Inflation is a hidden tax that made most of the oligarchs rich, and that keeps them rich.  Period, end of story.  

Fri, 03/07/2014 - 20:01 | 4523422 Harbanger
Harbanger's picture

Wrong!  Inflation is how statists keep financing the unsustainable welfare state until it goes bust.

Fri, 03/07/2014 - 20:06 | 4523433 LetThemEatRand
LetThemEatRand's picture

The welfare state is what keeps the oligarchs in control while they rape and pillage the productive segment.  When it goes bust, the oligarchs build factories with outdoor trampolines.   You are correct that inflation pays for the welfare state, but you are wrong about the motive and especially wrong about who is driving the train.  But then again, how's Boca Raton these days?

Fri, 03/07/2014 - 20:10 | 4523445 Harbanger
Harbanger's picture

The rich boogieman ain't driving the train, he's riding it.  I hope Boca is doing well, unfortunately some of my worse investments were in Forida.

Fri, 03/07/2014 - 20:11 | 4523450 Bohm Squad
Bohm Squad's picture

99/100 lobbyists agree!

Fri, 03/07/2014 - 20:14 | 4523451 LetThemEatRand
LetThemEatRand's picture

How do you define rich?  I agree that those who are rich only in comparison to the average middle class are riding the train to ruin.  The driver's wealth is measured in billions or maybe trillions.   You know, the guys who kept the money you lost on your investments in Boca.

Fri, 03/07/2014 - 20:15 | 4523459 Harbanger
Harbanger's picture

Those are globalists, calling them "the rich" plays into the same leftist class meme that made us dependent on bankers.

Fri, 03/07/2014 - 20:18 | 4523461 LetThemEatRand
LetThemEatRand's picture

You used the word "rich" as a noun, not me.  I called them oligarchs who are rich.  You then said that I used the "rich versus poor" meme.  I then called you out for using the term "rich" to define anyone who has more money than the middle class.  So I guess you're arguing with yourself.

Fri, 03/07/2014 - 20:20 | 4523468 Harbanger
Harbanger's picture

Oh, I thought you said it made them and keeps them rich.  Whatever, the emphasis is always that they're rich.

Fri, 03/07/2014 - 20:23 | 4523477 LetThemEatRand
LetThemEatRand's picture

I'll simplify my language for you in the future if you like.  

Fri, 03/07/2014 - 20:26 | 4523491 Harbanger
Harbanger's picture

OK, Thanks.  I forgive you and still love you, even though after all you're just a Lola.

Fri, 03/07/2014 - 20:29 | 4523501 LetThemEatRand
LetThemEatRand's picture

And when all else fails, personal attack coupled with self-promotion of your own pseudo righteousness.  Well played.

Fri, 03/07/2014 - 20:31 | 4523509 fonzannoon
fonzannoon's picture

Give me a sec. I 'm going to link something I once got from a 1%er. You guys might find it interesting,

Fri, 03/07/2014 - 20:37 | 4523527 Harbanger
Harbanger's picture

Don't link that new flying skateboard crap.  I can't believe the shit you fall for.

Fri, 03/07/2014 - 20:41 | 4523549 LetThemEatRand
LetThemEatRand's picture

I've resisted downvoting you until now for the preemptive strawman.  Scared of what he's going to post, are you?

Fri, 03/07/2014 - 20:42 | 4523554 fonzannoon
fonzannoon's picture

When you replied you kept me from linking it you putz. It was a fake which is good because you could not afford it anyway with your massive funding of the progessive agenda so you can finally be on the winning team.

Anyway this was sent to me not too long ago by a 1%er. Fwiw. I thought it was interesting

 

" I want to explain to you as well as I can, why if you think it through, there is no chance the 1% have anything in mind for the masses other than the Wall-E scenario.  And let me just say I have heard it all from the simple- ‘they are gonna take our pensions’ to Alex Jones’ mass cullings and the FEMA camps. None of that is going to happen. Keep your tin foil hat on for a minute though, because I am going to put on my 1% hat for the rest of this email and explain to you why we have no interest in ‘doing away’ or even pissing off the masses in any way.   It comes down to what Balzac once said:   “Nothing so fortifies a friendship as a belief on the part of one friend that he is superior to the other”   What you do not understand is how we are totally aware of how we depend on the masses. All we care about is our own privilege, as long as we have that we could give a shit about the rest of the world, we only care about ourselves and satisfying our want for folly and one upsmanship. (http://autos.yahoo.com/photos/velvet-wrapped-ferrari-599-hits-london-str...). This is it, as long as we have that we couldn’t give a rats ass about the rest of you- all we want is for Zabars to have a minimum selection of 20 caviars (we want globalization as that means MOAR luxury goods).   We do not like social upheaval- you know why? Not only does it create unpredictable consequences for our elegant system that keeps us where we are, but if you look at history, all times of even minimal social upheaval have caused social mobility- ie when the poor have sudden opportunities to become rich, and for the rich to fall from their ranks. A perfect system to us is one that limits social mobility at a pace acceptable to us. We can accept some new blood among the 1% and kick a few (David) Siegels out now and then (the NY social register has seen families come and go all the time), but there can be no sudden changes we aren’t prepared for. So this is why we want things running smoothly and not just from one economic crash to the next.   Then let me explain to you why we will never “cull” or do away with the masses. If anything we need way, way more of them.  Why would that be you ask? Because it takes 6 billion people+ just to produce the few million (the cream of the crop if you will) that we really need to keep us happy. Let me explain to this to you in statistical terms:   Out of an ordinary pool of a million people from the masses:   -Maybe 100 out of 500,000 women will be attractive enough to become a $1000 per hour hooker, and I don’t do less than 2 at a time.. I know the Japanese are working round the clock on sex robots, but for now I’ll have to pass. Besides we still need attractive women from the masses to be our many mistresses and make us happy as we approach old age. And even if we did only intermarry amongst our 1% selves (and then you’d end up looking like Prince Charles), which we don’t, its still good to have hot women around, you know? So the masses are needed by the truckload just to produce a small ore of hot women.   -Out of the 500,000 men, maybe only 10,000 would be smart enough to design a Porsche, and those babies aren’t going to design themselves… Plus when I get a disease I expect a small army working on a cure for me…   -Out of the total million, maybe 10% are skilled enough with their hands to ‘handmake’ all my luxury goods. And even my mistresses, who are of the masses, demand their leather goods to be handmade.  So robots and automation in factories are great, but I demand there is some artisan who personally crafts my shoes, my watch, my clothes, my car, my haircut, etc. etc. We only want the best, you see, and mass production just can never offer it by definition. Robots are never going to be able to hand restore the frescoes in my villa, or cook me a Heston Blumenthal feast of whimsy.   -Then we like entertainment just as much as everyone, so we need a huge proportion of these people working in some form of the entertainment industry, because I want movies just like everyone, my kids want videogames, just like everyone. You know how big of a population you need just to get a few good looking and/or talented people that you can put on tv?   -Then I hope for my childrens sake that they will have Rosie the Robot (from the Jetsons) to replace those awful maids and butlers (they judge us when they go home and then spread gossip, who wants that…) I have to hire right now to clean up after everyone. But right now I need a small army to clean up my dogshit, open my limousine door, each of us needs a stewardess of our own on the Learjet, etc etc. Just the lawn on my house requires a gardening team of 12. Again, I hope for my childrens sake the topiary can be ably performed by robots in the future, but for right now, we have to hire that gardening team to keep the trees looking like elephants. So we need 200k from the million just to be our servants and maintain our little ‘eloi’ bubble existence, until hopefully robots can replace them.   http://www.youtube.com/watch?v=zYu1qW8Dctk   -Then we need a massive chunk of people just to protect us. That is why we have organized the mafia to end all mafias: law enforcement. Check mate. So we need a big proportion of those people just to staff this law enforcement network. Then I need private security. Those little punks smashed the windows in one of the beach houses I haven’t gotten around to visiting for 5 years now and so I need a security team just to watch over it…   -Then you need a massive chunk of these people to staff the MIC so our system isn’t in any external danger and we keep calling the shots worldwide by ultimately resting most military power in a place where we have a good grip on it.   See what I mean, pretty soon, from the million people, many are all involved in our own quest to maintain our privilege, and we understand that we depend on them to realize this. The ones that we don’t want, well that is exactly why we created the free shit army in the first place, so they can have a shopping mall to shuffle around in while we go about our 3-hooker orgies. Remember we cant have these people threatening our notion of social mobility by getting uppity, so we have to organize a whole entertainment system for them to keep them distracted, not to mention a massive political system where they can fight with each other over the bones we toss them.   So you understand where this goes:   http://www.southparkstudios.com/full-episodes/s05e06-cartmanland   We need 6 billion people just to produce the few hundred million that sustain our bubbles (our maids and doormen, and chefs and waiters, and hookers and entertainers, our security guards, and cops and soldiers), and then we need to skim off the cream of the masses, the 10% with the highest IQs, to run our shit for us so we don’t have to (make our porsches and learjets, and our botox injections, and our handmade leather iphone cases- all of which robots can never do). So you cant just do away with the masses or else we wouldn’t get all the above, and at the same time, we can’t afford to let them get uppity (that threatens our stability). So the only answer was the free shit army, and it doesn’t cost us a cent, its actually the reverse. The more the free shit army grows from year to year, the more proportionately rich we actually become!   So the detritus of the masses we don’t need we will stick in little pods just like in Wall-E. Similar to the matrix for them, except we will not be so stupid as to impose those pods on them, we will let them design their own pods, and trust me, they will come out looking just like in Wall-E."
Fri, 03/07/2014 - 20:53 | 4523587 LetThemEatRand
LetThemEatRand's picture

You left out the signed, "Harbanger."

 

Fri, 03/07/2014 - 20:58 | 4523601 fonzannoon
fonzannoon's picture

I think it kind of fell somewhere in the middle of what you guys wre discussing. I was not picking sides because you two were not really arguing. I just figured i'd throw it out there because I believe that is the mindset of many of the super wealthy. That person seems to think that the FSA is sustainable. I think the one thing all of us have in common is we all agree it's unsustainable.

Fri, 03/07/2014 - 21:05 | 4523608 LetThemEatRand
LetThemEatRand's picture

My two cents is that it's the mindset of the semi-wealthy.  Say $10-$25M net.  Many of that set believe they are part of the club.  Which is why I wondered if Harbanger wrote it.  My impression of Harbanger is that he/she lost several million out of many more, and thinks it is the fault of the poor without realizing where that money actually went.

Fri, 03/07/2014 - 21:08 | 4523626 fonzannoon
fonzannoon's picture

I hear you. I'm not talking about the top 50 families. I don't know what the definition of semi wealthy is. I am talking about people making hundreds of millions.

I believe that we are rapidly heading, of not already at, a scenario where you have 1% making all the money. The next 9% doing pretty well servicing that 1%. The stock market is the reward to those 9%. Then you have the free shit army. Broke, clueless, but with an Iphone.

Fri, 03/07/2014 - 21:28 | 4523673 LetThemEatRand
LetThemEatRand's picture

I think it's a 50/50 whether the truly wealthy (the billionaires up) want to cull the herd.  The 1% mostly realize that the herd is to their benefit.  The .01% don't necessarily need us.

Fri, 03/07/2014 - 21:40 | 4523716 NoDebt
NoDebt's picture

Small number of rich, large number of poor, just enough middle class to service the rich.  As it has been in most societies throughout most of human history.  (And probably the most stable societal structure).

You've finally come around to believing me, I think.  And yes, we're pretty much already there.

Fri, 03/07/2014 - 21:08 | 4523627 Harbanger
Harbanger's picture

Sorry Lola. I donate time and money for the poor.  I blame Liberals and progressives.

Fri, 03/07/2014 - 22:30 | 4523881 SAT 800
SAT 800's picture

It's always a good idea to remember that you might be wrong. If you have one thing in common that you believe it; it's almost guaranteed to be wrong. Reality is not determined by voting and it doesn't give a rat's ass what your collective opinion is. this validation of ideas and memes by "voting"; by the numbers that agree with you is the primary sickness of the age; it replaces education and the hard work of critical thinking. but of course, it's a defecxtive replacement.

Fri, 03/07/2014 - 21:00 | 4523606 nightshiftsucks
nightshiftsucks's picture

Yep,without us slaves they don't have shit.They go on vacation and nobody there to cook,clean and make drinks,what kind of life is that ?

Fri, 03/07/2014 - 22:34 | 4523892 SAT 800
SAT 800's picture

It's not really believable. The error in specifying that 10% of the population can be design engineers is a particularly foolish mistake; although I'm willing to believe in ignorant and uneducated ultra-wealthy, most educated people understand that the top 10% are the Capitains in the Army, the Centurions in the Legion, it's the top 1% that design things, and the top 1/10 of 1% who design Porsches.

Fri, 03/07/2014 - 23:30 | 4524046 Curiously_Crazy
Curiously_Crazy's picture

You beat me to it.

In addition, the writing style is horrendous. Apart from the glaring grammatical errors, what one percenter would be using the juvenile high school drop out phrase of "I could care less"  when trying to imply the opposite?. What one percenter would bother linking to bloody youtube videos and shit to try and prove their point.

To me it read like one of those facebook posts that gets shared endlessly without question (Sorry Fonz)

Sat, 03/08/2014 - 08:03 | 4524595 fonzannoon
fonzannoon's picture

Hahaha no worries. No offense taken. It's too bad you are caught up in grammar etc. I don't give much of a shit about grammar and neither does he.  As far as "What one percenter would bother linking to bloody youtube videos and shit to try and prove their point." The answer is a 1%er who can relate to everyone on here and speaks our language. Outside of that I think the accuracy of what he is saying is pretty much spot on. That's all. This was about how the 1% see the world, and I think he did a decent job of illustrating it.

Sat, 03/08/2014 - 10:21 | 4524735 Curiously_Crazy
Curiously_Crazy's picture

+1 Cheers. I guess it's easy to become a bit to cynical over time. A reasonable amount of skepticism is a good thing, but to much can block out otherwise useful info.

Sat, 03/08/2014 - 15:57 | 4525183 frankthomaswhite59
frankthomaswhite59's picture

.

Sat, 03/08/2014 - 04:18 | 4524459 MeelionDollerBogus
MeelionDollerBogus's picture

Depends how much automation & outsourcing you use. If the basics of design & modules are farmed out to clever but poor people they will be less poor & feel somewhat intellectually satisified. If high-level managers & automated evolving algorithms are used to stitch together inspirational attempts and modules, all inspiration will be given to the top levels rather than originators and I think that can comfortably bring in the 10%.

Every programmer is able to be a design engineer & I think a giant boatload of unemployed programmers are out there due to overproduction of them from colleges & universities.

Sat, 03/08/2014 - 04:14 | 4524454 MeelionDollerBogus
MeelionDollerBogus's picture

precisely highlighting why I've been right in saying Agenda 21 is a hoax.

They'll play it up just so you do the opposite just so you make excess babies & take loans to make the elites richer just to feed those babies, sell the babies too, making them a worker slave-force to tend their tulip & azalea gardens and other fancy things that are in special greenhouses because they're imported & can't grow under local conditions.

Your future isn't just the Matrix 99%ers, it's the future depicted by the movie In Time.

Sat, 03/08/2014 - 08:44 | 4524626 tip e. canoe
tip e. canoe's picture

Balzac once said:   “Nothing so fortifies a friendship as a belief on the part of one friend that he is superior to the other” 

much profundity in that simple sentence.  thanks for sharing fonz...interesting reading.

Fri, 03/07/2014 - 20:23 | 4523479 NOTaREALmerican
NOTaREALmerican's picture

The guys with the money usually do get the "emphasis". 

Who else would, the guys without the money? 

Fri, 03/07/2014 - 20:35 | 4523506 LetThemEatRand
LetThemEatRand's picture

Everyone knows that it is all the fault of the poor.

Fri, 03/07/2014 - 20:34 | 4523519 Harbanger
Harbanger's picture

Of course not, it makes sense that succesful individuals would have more emphasis.  The problem is when upward mobility is closed off in a centrally planned society for all but the club members.  That's when the common man has a problem and makes plans to hang the old guard.

Fri, 03/07/2014 - 20:36 | 4523523 LetThemEatRand
LetThemEatRand's picture

So you think the club members really want to help the poor, or is that cover?  

Fri, 03/07/2014 - 20:40 | 4523541 Harbanger
Harbanger's picture

Cover.  Many of the old guard were slave owning KKK members who morphed into slave owners of the modern welfare state.

Fri, 03/07/2014 - 20:42 | 4523557 LetThemEatRand
LetThemEatRand's picture

So if you agree it's cover, then why do you call out those who actually want to help the poor as the problem?  Why not focus your anger on those who only pretend to do so in order to consolidate their power?

Fri, 03/07/2014 - 21:07 | 4523621 Harbanger
Harbanger's picture

Those who say they want Gov to help the poor, ie. US Liberals, are pretending in order to consolidate power.  The # of poor is increasing as well as the # of government dependents.  Look anywhere anywhere in the US where they've held held power as examples.  There's no denying this.  We'll pick up on another thread later.

Sat, 03/08/2014 - 04:06 | 4524450 MeelionDollerBogus
MeelionDollerBogus's picture

I firmly believe they're doing everything they can to help the poor.

To stay poor.

Fri, 03/07/2014 - 22:39 | 4523904 SAT 800
SAT 800's picture

Nothing is closed off; you have no idea what you're talking about. the common man is closed off because of IQ100; it's taken care of already. they don't make plans. they respond to chartismatics when they can't pay their bills anymore. The average person is acutely aware that they aren't going anywhere. The United States is completely open to upward mobility; this is one of its chief characteristcs and it's as true now as it ever was; well except for income tax and anti-business regulations, so not as true as it was in 1920; but still no "closing off" has occured.

Sat, 03/08/2014 - 04:05 | 4524449 MeelionDollerBogus
MeelionDollerBogus's picture

sky is blue!

No, indigo!

Nuh uh, it's saphire!

Wrong again fucko, it's azure!

Sat, 03/08/2014 - 04:04 | 4524448 MeelionDollerBogus
MeelionDollerBogus's picture

Driver? these fuckers are so fabulously rich they don't need or want a driver. They're taking bets in the billions with each other on when we notice there's no driver then they'll detach their cars and let us crash.

Fri, 03/07/2014 - 22:48 | 4523925 SAT 800
SAT 800's picture

Both of you are right; now you should be happy.

Sat, 03/08/2014 - 04:00 | 4524446 MeelionDollerBogus
MeelionDollerBogus's picture

"the sky is blue!!"

'NO, wrong, FAIL. The sky is INDIGO!!'

(cough, cough)

Fri, 03/07/2014 - 19:55 | 4523407 Carl Popper
Carl Popper's picture

Deflation is a danger to banks and those who make their living thru leverage.

It is a blessing to the rest of mankind.

Fri, 03/07/2014 - 22:58 | 4523951 SAT 800
SAT 800's picture

Of course. The premise of the article is true. The evidence from the turn of the century, sorry, I'm thinking about the turn of the last century; is conclusive.

Fri, 03/07/2014 - 23:08 | 4523989 Grande Tetons
Grande Tetons's picture

Hey, SAT, I remember we compared notes awhile ago. I lost 10k shorting the GBP/USD. I mention this only to keep the honesty meme alive.  Fucking idiot, I moved my stop....nah...that will never hit. Yep, Sunday night...a couple of weeks ago..poof. 

Fuck me.  I have a small disaster short on one of the yen crosses over the weekend....as proof that I really have not learned my lesson. 

 

Sat, 03/08/2014 - 03:59 | 4524445 MeelionDollerBogus
MeelionDollerBogus's picture

The whole market is rigged, why would you even do this? LIBOR, bond rates, bond purchasing volume, timing of quotes & slippage of stops, all rigged, you know that the insiders are winning because of cheating.

NANEX helps expose that.

Why would you dare put 10k into this?

I wouldn't put more than $500 on anything from options to a bundle of shares at a time. It's up to me if I want to do it again & again but I usually won't. I'll make sure essential things are bought long before any money is left over to dare try paper markets.

10k just to blow on a FX maybe? Really?

Are you that foolish or simply very rich? Normal people don't have just 10k to throw around like darts at a board, Sunday night next to the pool tables. Normal people have more sense than to do so even if they had the cash to do so.

 

Fri, 03/07/2014 - 19:57 | 4523410 Dagny Taggart
Dagny Taggart's picture

John Williams (ShadowStats) implies hyperinflation triggers this year: 8:00 mark http://www.youtube.com/watch?v=9LSHdkaCLOA

Fri, 03/07/2014 - 19:58 | 4523416 NOTaREALmerican
NOTaREALmerican's picture

He's been "implying" that for how long now?

Fri, 03/07/2014 - 22:45 | 4523918 SAT 800
SAT 800's picture

It doesn't matter what John Williams thinks. If you can't or won't do research and think for yourself; at least do yourself a favor and don't form opinions based on internet gurus. Hyperinflation is completely out of the question this year; which only has 9 months left in it; he must be a raving loony.

Sat, 03/08/2014 - 03:56 | 4524442 MeelionDollerBogus
MeelionDollerBogus's picture

Indeed. We disagree on much but on this John Williams shows his weakness. He's very honest at reporting recorded facts which is not honestly reported by the BLS or Fed. What he's not good at is predicting.

It's a chaotic system & Rickards addresses the complexity angle very well in the final chapters of Currency Wars.

It is coming. No way out of it. But to know when is to know the breaking point of every critical chaotic subsystem of a total system that no one can even fully comprehend (in complexity, not quantity) for probabilities of breakdown, and his example is an avalanche (one example). It takes but one last snow flake to prime it & perhaps one last nudge, perturbation, to trigger it, but how will you know when?

You'd need to know all future states in a chaotic system of all particles in the system & all the external interactions coming & all the self-self interactions within the system greatly exceed all computing capacity of mere mortals & of not-quantum-entangled systems.

This leaves us with no real time prediction. It would likely re-scale similarly to past collapses of hyperinflation but each has its own story. Each had momentum, conscious agents & unavoidable least-harm decisions to make in reaction as well as hoocouldanode situations like the dumbass in charge who started it all.

It's not just over-printing, it's confidence removal. Once enough people show, without hesitation, a lack of confidence in a currency then others may follow. Once they do follow & that group gets larger the NEXT larger group is assured after only so much time/interactions/iterations and so on until equilibrium is reached which may or may not lead to the currency itself failing to survive.

Williams is a statistician which is good but it requires far, far more tools than that to comprehend polynomial-complete or NP-complete levels of complexity. It's just not what statisticians do. It's what computer scientists do.

Sat, 03/08/2014 - 08:51 | 4524630 Grouchy Marx
Grouchy Marx's picture

And certainly be careful not to form opinions based on internet article commentators!

Sat, 03/08/2014 - 08:41 | 4524624 Grouchy Marx
Grouchy Marx's picture

He could be right or not on the timing; but we will have hyperinflation sooner or later. When it happens, history shows us it will come fast and hard and there will be no time to prepare or make adjustments. 

Fri, 03/07/2014 - 19:58 | 4523417 CURWAR2012
CURWAR2012's picture

irredeemable fiat currency (read debt) has no other option but to inflate. This is well explained by Monetary-metals.com

Fri, 03/07/2014 - 19:59 | 4523419 NOTaREALmerican
NOTaREALmerican's picture

Is this the anti-matter of the previous article?

Fri, 03/07/2014 - 20:35 | 4523430 BullyBearish
BullyBearish's picture

The owners of the "money" see it as being lent to you and me for our lifetimes.  All they have to do is devalue (inflate) the currency to reduce its ability to buy goods and services--meaning they can give you much less over time for the money you've earned. Similarly, when they loan money to China, the inflation devaluation reduces the amount needed to pay the loan back.  We and the lenders get poorer and the money owners get richer.  Since they control the printing presses (private central banks) they are never at risk...except in a deflationary period.  During deflation, assets lose value and significant owners of assets lose the most.  The fear of deflation in 2009 triggered the repeated bouts of QE which were nothing more than wealth transfers from future earnings to current significant owners of assets to reduce/minimize their losses.  The government, "for the people"...went along willingly and still does to this day.  What most people don't realize is that the "for the people" refers only to the significant asset owners.

Fri, 03/07/2014 - 20:03 | 4523431 LooseLee
LooseLee's picture

Another topic ThisRideNeverEnds cannot comprehend (DEFLATION). Fortunately, we will eventually see a huge surge of this most basic and necessary phenomenon...well stawks won't like it....

Fri, 03/07/2014 - 20:07 | 4523438 Bohm Squad
Bohm Squad's picture

It's all fiat BS...fiat flows from the "top" down and inflation is the shiny pinwheel that makes idiots believe they are better off than last year because their paycheck increased 2.5% (if they're lucky).  Purchasing power is not in the US population's vernacular.

 

Gold and silver flow from the bottom up and force bankers and governments to heel to their customers...what a novel concept.

Fri, 03/07/2014 - 20:06 | 4523442 NOTaREALmerican
NOTaREALmerican's picture

I think people forget the effect of bullshit and inflation taken together.

Inflation causes increases in numbers.   Bigger numbers allows for the creation of bullshit about the goodness of the increased numbers.

(Cue authoritive voice)

CEO: Gentlemen,  this increase is a direct result of MY leadership.  
BofD: This man deserves more money!

Bullshit is how sociopath screw dumbasses, so inflation allows for more bullshit which allows for more oportunity for the sociopaths to create bullshit and run society.

If we had deflation,  how would we have perpetually increasing yoy sales and income?  

No,  in a world of bullshit inflation is the only way to go, and remember.

Anything + bullshit = $ ** bullshit   (money to the power of bullshit

Bullshit, ask for it by name.

 

Fri, 03/07/2014 - 20:09 | 4523448 Bohm Squad
Bohm Squad's picture

Funny thing about BS...you never have to ask for it...it's spoonfed to us each and every day.

Fri, 03/07/2014 - 20:15 | 4523458 NOTaREALmerican
NOTaREALmerican's picture

Our brains are designed to create bullshit (self delusion) and designed to believe bullshit.  

morals + bullshit = religion
governmetn + bullshit = politics
craft + bullshit = splatter-art
sex + bullshit = romance.

Bullshit works.    We manipulate dumbasses with bullshit.   Politicians manipulate their dumbasses with bullshit.

It's how humans compete.  The manipulated people get self-delusion (which is happiness) the manipulator (the sociopaths) gets power.   Very simple effective evoluationary system.

Sat, 03/08/2014 - 03:48 | 4524439 MeelionDollerBogus
MeelionDollerBogus's picture

if only more of us could be smart'n'savvy. I'm immune to belief. It's made my life very hard socially. Intellectually no problem but socially, you have to really truly speak & believe bullshit or you are immediately an outcast for not knowing what bullshit to say. Since I can't accept any bullshit whatsoever, never have my entire life, I've had to devote decades just to learn the finer nuances of acting out bullshit so as to stop alarming the sheeple.

Sat, 03/08/2014 - 03:47 | 4524437 MeelionDollerBogus
MeelionDollerBogus's picture

wait, I need a re-cap.

So anything+bullshit = money bullshit ? That's a lot of power.

And if that holds then does this theorem hold?

sociopaths money bullshit = evil+money+sheeple?

Fri, 03/07/2014 - 20:19 | 4523454 Racer
Racer's picture

Simple reason why:

 

  • tax earnings

  Then after you have taxed earnings, you then TAX the earnings EVEN MORE

  • tax buying clothes, shoes
  • tax buying food (orange juice etc.)
  • tax petrol to get to work
  • tax cars to get to work
  • tax compulsory insurance on cars to get to work

Did I say tax stuff? Oh yeah,

  • Tax electricity
  • Tax gas

Oh wait, did I say tax stuff?

You have been had over again with inflation (that we minimise) HEEEEE HEEEEEE

even more TAXXXXXX on your feeble earnings (*cackle*)

CAPITAL GAINS TAX (*CACKLE*)

You don't say you are going to die and evade any more tax?

**MONTROUS EVIL CACKLE**

You have been had for INHERITANCE TAX moron...  reset your life

Oh you can't

 

HAHAHAHAHAHAHA

(government target achieved yet again, moron)

 

 

 

 

Fri, 03/07/2014 - 20:31 | 4523507 lucyvp
lucyvp's picture

What the bankers fear is a "deflation" of asset prices, they formed the base of the pyramid of borrowed money. If houses,stocks etc start going down all of a sudden the collarteral that backs loans crumbles, and the money pyramid collapse.  I don't think Drahgi fears "pencils" falling in price.

I think a larger reason than the fed printing for the inflation in asset prices is the fasb rule change that releived banks from having to mark collateral to market.

Fri, 03/07/2014 - 21:06 | 4523622 kwatinhu
kwatinhu's picture

I have never accepted or understood how deflation is supposed to be so bad. If inflation is bad, how can the opposite not be good? I don't mean in absolute terms in either case,of course, but prices fall, but they don't don't just free fall.

Sooner or later the market determines a bottom and then things start costing the their true marketable price with out all the fake crap and shenanigans the money changers bake in to the cake.

If these bastards are so afraid of it, IT MUST BE GOOD.

Bring it on!

Fri, 03/07/2014 - 21:18 | 4523646 Izznogood
Izznogood's picture

This is just plain stupid. "our incomes go further and our savings will buy more" .. Sure, and who is going to buy anything other than bread when he is expecting the goods to be sold cheaper tomorrow? Will you buy a car at 20.000$ today, if in a month you can get it for 19.000 and the next month for 18.000?

 

Besides, you seem to be assuming that your paycheck will stay the same, and not be deflated.

Sat, 03/08/2014 - 03:43 | 4524435 MeelionDollerBogus
MeelionDollerBogus's picture

ALL Of us, me first in line.

I'm out of milk. I want milk.

You think with a lower price today than yesterday I'm waiting? I'm getting milk as soon as I can. I need not wait for the next time I am paid it will be even cheaper if deflation continues.

Plus, given volatile prices (this is true even for computers) it could be higher next week and not lower again until half a year later.

I never waited to buy a computer. I'd avoid a configuration I thought was crap, avoid a price I thought was bad for what was offered (out of average for what I know the technology can & should do, therefore I'd never have a MacInTrash as they are all overpriced garbage), but I'd never wait for prices to drop.

Never needed to. Deflation is the #1 most reliable indicator I should buy immediately because prices have already dropped enough to extend my purchasing power.

Comparing performance-to-performance my newer netbook isn't nearly as good as my desktop. I paid $500 for the desktop which has 4GB RAM & 4 CPU cores to work with all running over 3 GHz.

The netbook has 4 CPU cores and 1 GB RAM and each core is 1.8 GHz. I paid $230 for it 2 years later. It's very thin, very tiny, very light, and portables always cost more for the same power than a desktop because of this, battery cost too.

When I got my first 386 computer that fucker was over $1500 and in today's dollars that would really be $5,729.62 given 6% inflation average every year using a sensible inflation number.

So deflation doesn't ever make me wait and it always helps me. Always.

When prices go up is when I wait. Not when prices go down. Ever.

I wait for prices to go down and if they do not then the high priced item is BANISHED FROM MY SHOPPING LIST FOREVER.

I can safely assume my paycheque will stay the same: it is deflated already, by inflation, and will continue to be deflated until it can't pay for anything. Ever.

You are a dumb fuck drinking the eCON kool-aid from the Cramer&Keynes Jonestown school of eCONomics.

Fri, 03/07/2014 - 22:26 | 4523871 Money_for_Nothing
Money_for_Nothing's picture

Sales tax, property tax, in EU VAT tax. Prices and nominal values can not be allowed to go down. If you took out the taxes based on % of value the US GDP would probably be less than a trillion. That is also why the collapse in the velocity of money is such a problem for the authorities.

Fri, 03/07/2014 - 22:37 | 4523900 swmnguy
swmnguy's picture

You can't reliably make money by lending it at interest without inflation. The borrower has to be convinced he'll have more currency next year than this year, so he can pay back the loan.  If deflation sets in people avoid debt of any kind.  That is the complete antithesis and undoing of our brand of finance capitalism. Therefore, deflation must be avoided at any cost.

Sat, 03/08/2014 - 03:35 | 4524429 MeelionDollerBogus
MeelionDollerBogus's picture

I disagree. You can do it, I can do it, but we're honest people. The mafia-central bank & its minion banks can't do it because they can't be honest.

When money is lent to get an increased productivity, once that productivity is real (production of goods) a benefit will happen. Could be in currency, could be in physical goods, but so long as the % gain total is lesser than the % owed for the loan, the loan can be paid (in goods and/or cash). See, the bankster minions don't want that.

Cash only, since cash is their demon-creation that by law no one else can issue. Minion-banks only under the finely scrutinized directive of the central bank.

I would be more than happy to lend any resources, not just cash, to a reliable farmer, or gold miner, etc., and get paid in goods and/or cash. In the handy case of gold or silver the goods are cash (money, gold is money) so now I get the best of both worlds.

Stellaconcepts on youtube (John Christian) actually used a bond like this. Owned it 2 years from Royal Silver, the producer of the .99999 fine Andean Cat silver round. You get your 5k or 2k back or whatever it was after 2 years but all along the way you get paid an income dividend as SILVER ROUNDS, something like 2 per month.

An honest borrower & lender can make such arrangements.

A dishonest broker like a central bank can't because they're a mafia in a skim-racket & nothing must oppose the racket. The racket doesn't work unless people are forced by law & culture combined to reject everything as money except the decreed fiat of the Central bank.

Sat, 03/08/2014 - 08:51 | 4524629 tip e. canoe
tip e. canoe's picture

absolutely agreed.

well said.

Sat, 03/08/2014 - 10:53 | 4524799 swmnguy
swmnguy's picture

"MDB": Well said. As you point out, though, productive lending at interest without inflation requires a lot of work, research, and a dollop of good luck (which is another way of saying, "work and research").   Systematic inflation allows for laziness.

Sun, 03/09/2014 - 03:20 | 4527083 MeelionDollerBogus
MeelionDollerBogus's picture

It's not just productive interest. I had a few glasses of Irish Whiskey on my day off there so I forgot to add something. Since the minion banks demand only fiat in repayment no matter how well you do for % gain on a loan vs productivity you may lose a giant portion of that (goods, services) by forcing a conversion to fiat. Degradation of currency, fluctuation of demand for goods, services at particular time-windows or locales vs the demanded deadline for loan repayment, you may end up taking a % loss after just from conversion all the while fully achieving the productivity % increase goals higher than the % of the loan owed!

That's the game. Racket, skim & coerce. We have no choice under the law about what is regulated as money & what money is paid for taxes. That means government+minion-banks+central bank dictate all.

If we loan to each other, and I have done this before, we can set any terms we want & I suggest we do so rather than loaning money to banks & pretending they are "deposits".

Trust them on that & they'll deposit one right in your mouth. They can't be trusted.

Sat, 03/08/2014 - 09:36 | 4524679 csmith
csmith's picture

That is the complete antithesis and undoing of our brand of finance capitalism.

Then "our brand" of finance capitalism deserves to be shunted into an evolutionary cul de sac. If it simply means excessive leverage incentivized by a central bank unwilling to allow ANY failure within the system (see Taleb's "Antifragile") in the name of economic and social "stability", then the sooner the better. In fact there is no better, simpler definition for "our brand" of capitalism than crony capitalism. The cronies get rescued and everybody else suffers. The dynamism of failure and the recycling of capital into new ventures is the lifeblood of the system. It is draining away.

Sat, 03/08/2014 - 10:54 | 4524801 swmnguy
swmnguy's picture

I couldn't agree more.

Sat, 03/08/2014 - 11:27 | 4524879 AdvancingTime
AdvancingTime's picture

For a long time I have been trying to develop a scenario for a market "super crash" and a reasonable map that would arrive at such a situation. Most investors think that even if things go downhill fast that they will be smart enough to get out of the markets. But what if it hits like the flash crash on steroids?

We know that can't happen because circuit breakers have been put in place to arrest panic style moves, but imagine a market that falls, trade is halted, and the market simply does not reopen for days, or even weeks. We have set up a house of cards based on debt and contagion is the cancer eating at the foundation. the article Flash Crash On Steroids can be found below.

http://brucewilds.blogspot.com/2013/01/flash-crash-on-steroids.html

 

Sat, 03/08/2014 - 12:21 | 4525001 Pareto
Pareto's picture

Bullshit.  Its not about the amount of currency - its about the amount of purchasing power/currency held!  Falling prices means the borrower can actually make intertemporal decisions rationally based on a trade-off between present and future consumption.  Under falling or even steady prices, if I borrow now, I sacrifice future consumption for greater consumption today.  As a lender, I forgo present consumption with the reward of not only commensurate consumption in the future, but, even greater consumption in the future.

 

The FED completely distorts this economic calculus.  Savers are punished, while current consumption is forced as a result of rising prices.  Managed prices (interest rates) destroys efficient capital allocations and instead imposes behaviour of distorting incentives - something that would never happen under free and unfettered markets.  Falling prices have ALWAYS been a silver lining to any recession and depression. You need only to look at Venezuela or Argentina to see what happens when a government loses control over interest rate and price management.

Sat, 03/08/2014 - 02:54 | 4524398 Downtoolong
Downtoolong's picture

I’m a deflation masochist. Please, hurt me some more.

And, if deflation is such an anathema to global economies, why haven’t we banned all development of computers and consumer electronics which have seen a 99.9% decrease in cost per unit of performance in the last 20 years?

What is important for these [tech product] companies to thrive are not the nominal prices of the products they sell, but the price spreads between their input and output.

And the fact that a lower cost of production means that billions instead of thousands of people can afford to buy one (provided of course their credit card isn’t already maxed out on other overpriced goods and services).

 

Sat, 03/08/2014 - 06:29 | 4524522 Balvan
Balvan's picture

Austrian economists are a joke. MMT explains everything

Sat, 03/08/2014 - 06:35 | 4524527 ignl
ignl's picture

I consider myself libertarian and think that chicago/austrian school of economics has right solutions to better lives of most people, but cannot agree with this article. First reasoning that deflation is any good is pure logical fallacy from start to end. It cannot be beneficial to consumers because they are also producers. Any gain is ofset by loss. And wage cut is only for lucky ones, others would lose their jobs which would result in more instability and slipery slope to depression would begin. All this would be made 100x times worse in current credit money system for reasons I assume most of people here are aware of (deleveraging etc). Great depression was perfect example of this "benefit" :) Moreover austrian economist should be thinking systematically and think what incentives system provides. And is it more profitable to hoard or to invest in factory in deflationary environment? Such an environment would be good only for savers and those hated 1% would be made very happy (oh those fuckers - inflation is good for them, deflation is even better :) maybe we should just stop worry about them as you can not remove 1% anyway there will alway be 100% total :)). Anyway deflation is very dangerous and should not be ignored or even praised like in this article...

Sat, 03/08/2014 - 11:15 | 4524855 AdvancingTime
AdvancingTime's picture

Price stability would be the best policy but we seem to enjoy the idea of a little inflation to give the illusion we are getting richer and moving forward. In defence of deflation to does tend to keep people and governments in a position where they must be a little  more honest.

Sat, 03/08/2014 - 10:13 | 4524722 kenezen
kenezen's picture

Deflation and Inflation should be attributed to the purchasing power of the currency not the products. Example from the 1920's to now our dollar is currently worth three cents.

Sat, 03/08/2014 - 11:02 | 4524804 AdvancingTime
AdvancingTime's picture

Changes in the value of a currency directly affect "buying power" and the value of assets. The future value of an asset and what it will be worth is very important when we look towards financial security. 

When money begins to pursue a product or good and the price begins to rise those holding that item tend to lose the incentive to make a fast sale. In reaction more money may be pulled out of the closet, and the many places it has been put to buy things before the next price jump.

This "more money" constitutes an increase in supply. If this happens at the same time items are being held back or removed from retail shelves for better prices which "lessens supplies" things can really get interesting fast. This helps explain hyperinflation, details in the article below.

http://brucewilds.blogspot.com/2014/02/inflation-can-effect-supply-and-d...

Sat, 03/08/2014 - 10:38 | 4524769 AdvancingTime
AdvancingTime's picture

By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens. said John Maynard Keynes. As the central banks print like crazy to control interest rates on bonds they devalue the currency.

While there are not many Bond Vigilantes there are many Currency Vigilantes and changes in the value of a currency affects buying power. Inflation, deflation, what is something worth? These are all very important questions to consider going forward. More on the timing of the coming inflation in the article below.

http://brucewilds.blogspot.com/2014/02/when-will-inflation-strike_1.html

Sat, 03/08/2014 - 12:11 | 4524974 q99x2
q99x2's picture

The green shoots were brown--fire kindling bitchez.

Sat, 03/08/2014 - 13:25 | 4525122 novictim
novictim's picture

Why is deflation important?  

It destroys jobs and economic growth and everything that comes from a active market place.  If these things are not important to you, then yes, deflation is not important.

 

Deflation means that "money"/wealth/currency rise in value on their own which then encourages folks to not invest in new businesses or in stocks or in real estate (hey, some of these behaviors are half-good).  The end result is a winding down of the transactional activity in the economy.  

Why employ people to make X when you are guaranteed a return on your money with no action on your own part?  Why take risks?  There are many other unintended consequences of Low Inflation and or Deflation...we are seeing these play out today.

Sat, 03/08/2014 - 16:23 | 4525491 pndr4495
pndr4495's picture

The number of jobs to be filled must rise no?  Those jobs create salaries. Those salaries must be spent within the economy under inspection.  No job growth = no growth in consumption.  No consumption within the economy , well then , why RISK creating a business or expanding an existing one ?  As G. Edward Griffin said a while ago - " America is in serious trouble." Our country is overrun with " phony notes from the gang Moss Crabtree. "  Prosperity seems like it's behind us and fading into the sunset.  This country has been screwed by debt based money , over which our Treasury Dept. does NOT have control. The City of London has that.  

Sat, 03/08/2014 - 21:11 | 4526458 Ancaeus
Ancaeus's picture

Here's why deflation is really bad: 

  1. Consumers will defer purchases in anticipation of lower prices.  I.e., Money that you already have will become more valuable so you hang onto it.
  2. Producers will defer investments because they forsee lower prices on their products.  I.e., they don't want to incurr debts with today's dollars, but have to pay off those debts with sales in deflated dollars.
  3. Producers also cut employment -- no point in producing products if nobody is buying them.
  4. Producers cut prices even more in order to keep products moving.  There is a "race to the bottom" in prices -- producers compete for the very few customers that are really buying.
  5. Unemployed people buy even fewer products -- causing even more deflation.
  6. Cycle repeats -- go back to 1.

So, if we have significant deflation, those people who already have a lot of money will be much better off -- for a very short time.  But, after that, the economy will tank, and everyone (even rich people) will be much worse off.

And, by the way, most "rich" people don't actually have a lot of actual cash.  They have various kinds of assets like CDs, investment accounts, equities, etc.  The value of all of these things is subject to counter-party risk and liquidity risk.  In a severe deflation, they may not be able to get cash from these assets.  In that case, they will be in just as much trouble as the rest of us. 

Now, I know that there are a lot of gold-bugs on this list. In a severe deflation, the dollar-denominated value of your gold will also decline.  I would predict that gold prices will decline more sharply than other assets simply because any investor can see that there is an advantage to holding dollars during deflation -- they will sell their gold.

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