"Risk Free Savers" are the problem now, according to the Fed.
jmski52
Posts: 22,947 ✭✭✭✭✭
So, I'm minding my own business in "the reading room" with my current copy of NN, and I happened to peruse the Viewpoint piece written by Kurt Bellman in response to an earlier remark by Donald Markay, who asked "How is it moral or good public policy to punish those who have saved in order to provide for themselves?"
Indeed, that seems to be the question of the day.
Bellman makes several points in his viewpoint about morality arguments in economics having to do with the WWII generation and the older baby boomers vs. the younger generations, in terms of savings, risky vs. risk-free investments, aggregate vs. individual thrift and the global economic war that is being waged even though it is undeclared.
His solution is to make risk-free investing by retirees to be unacceptable and unpatriotic.
As I was listening to the CNBC report on the FMOC's minutes that were released only a little while ago this afternoon - the CNBC reporter blurted out the same, exact words - "Risk-Free Savers" as part of the Fed's strategy to herd people (particularly pension funds) back towards the bond and stock markets, presumably by keeping interest rates low.
Santelli did his own report and one of the followup remarks was that the money that is now coming out of commodities seemed to be flowing back into bonds, based on the 10-yr auction.
My thought was, "tell it to Bill Gross".
One has to wonder when we can expect to be called "speculators" and "manipulators" for making any money in precious metals investment. Will a "windfall profits" mentality prevail with those who didn't buy pms, and will we be targeted for our having been smart enough to use our own money to buy something that could possibly secure a decent future for our own families, instead of plowing it into the bond market that is being trashed by our own government's policymaking? According to the new ideology, it's no longer patriotic to look out for your own future.
Be advised.
(edited to remove double-typed comment)
Indeed, that seems to be the question of the day.
Bellman makes several points in his viewpoint about morality arguments in economics having to do with the WWII generation and the older baby boomers vs. the younger generations, in terms of savings, risky vs. risk-free investments, aggregate vs. individual thrift and the global economic war that is being waged even though it is undeclared.
His solution is to make risk-free investing by retirees to be unacceptable and unpatriotic.
As I was listening to the CNBC report on the FMOC's minutes that were released only a little while ago this afternoon - the CNBC reporter blurted out the same, exact words - "Risk-Free Savers" as part of the Fed's strategy to herd people (particularly pension funds) back towards the bond and stock markets, presumably by keeping interest rates low.
Santelli did his own report and one of the followup remarks was that the money that is now coming out of commodities seemed to be flowing back into bonds, based on the 10-yr auction.
My thought was, "tell it to Bill Gross".
One has to wonder when we can expect to be called "speculators" and "manipulators" for making any money in precious metals investment. Will a "windfall profits" mentality prevail with those who didn't buy pms, and will we be targeted for our having been smart enough to use our own money to buy something that could possibly secure a decent future for our own families, instead of plowing it into the bond market that is being trashed by our own government's policymaking? According to the new ideology, it's no longer patriotic to look out for your own future.
Be advised.
(edited to remove double-typed comment)
Q: Are You Printing Money? Bernanke: Not Literally
I knew it would happen.
I knew it would happen.
0
Comments
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
I knew it would happen.
Exit bunker, enter Matrix. LOL
The best moves anybody over 55 can make is to be as small a drain on medical resources as possible and need soc. sec. benefits for nothing more than tip money. A person over 55 in good health should live to at least 80-90 and to think of what this country will look like 25-35 years from now is just plain frightening.
<< <i>How long does anyone think it will take for the average American voter to realize that this govt is financially mismanaged, your personal money is not yours, the govt will not give up what it can take, and that no govt I know of in the history of known civilization has ever repayed its debt in real money? NONE.
The best moves anybody over 55 can make is to be as small a drain on medical resources as possible and need soc. sec. benefits for nothing more than tip money. A person over 55 in good health should live to at least 80-90 and to think of what this country will look like 25-35 years from now is just plain frightening. >>
Any advice to those in their mid 30's?
<< <i> Any advice to those in their mid 30's? >>
Keep paying your taxes, those of us over 50 are going to need the money.
Exit bunker, enter Matrix. LOL
<< <i>
<< <i> Any advice to those in their mid 30's? >>
Keep paying your taxes, those of us over 50 are going to need the money.
Interesting. Savers who will save at even very low interest rates. Princeton professor Paul Krugman wrote some compelling commentary on this very topic found here
Or here if you dont want to click the link....
CAN DEFLATION BE PREVENTED?
This week's cover story in The Economist makes it more or less official. Deflation, not inflation, is now the greatest concern for the world economy. Over the past year, producer prices have fallen throughout the advanced world; consumer prices have been falling for the last 6 months in France and Germany; in Japan wages have actually fallen 4 percent over the past year. Until the recent crisis prices were falling in Brazil; they continue to fall in China and Hong Kong; they will probably soon be falling in a number of other developing countries.
So far, none of these price declines looks anything like the massive deflation that accompanied the Great Depression. But the appearance of deflation as a widespread problem is disturbing, not only because of its immediate economic implications, but because until recently most economists - myself included - regarded sustained deflation as a fundamentally implausible prospect, something that should not be a concern.
The point is that deflation should - or so we thought - be easy to prevent: just print more money. And printing money is normally a pleasant experience for governments. In fact, the idea that governments have a hard time keeping their hands off the printing press has long been a staple of political economy; dozens of theoretical papers have argued that the temptation to engage in excessive money creation causes an inherent inflationary bias in fiat-money economies. It is largely to combat that presumed bias that most of the world has accepted the notion that monetary policy should be conducted by an independent central bank, insulated from political influence - and has written into the charters of those central banks that they should seek price stability as their main, often only, goal.
Yet here we are, with deflation turning out to be a serious problem after all - and with policymakers finding that it is not as easy either to prevent or to reverse as we all thought.
How can this be happening? What does it imply for policy? The purpose of this note is to argue that more or less conventional economic theory actually does suggest some answers to these questions - but that these answers fly in the face of conventional policy wisdom. And because the answers are so hard to accept, deflation is indeed a real risk. (This note should be viewed as a companion piece to my earlier writings on Japan, particularly Japan: still trapped , but this time tries to approach the problem more generically).
The note is in four parts. The first considers the popular view that deflation is simply a product of world excess capacity, and the problems with that view. The second part argues a point that is gradually becoming familiar: that concerns about deflation generally make sense only if they are linked with the idea of a liquidity trap, in which the money supply is irrelevant at the margin. The third part tries to go to a deeper level, relating deflationary pressures to an excess of desired saving over desired investment - an approach that leads to a seemingly paradoxical interpretation of deflationary pressures that I believe to be fundamental to the whole issue. Finally, I consider the policy implications of the apparent emergence of a serious deflationary threat.
1. Excess capacity?
In the business press one often finds a simple view about deflationary pressures that runs something like this: the world's production capacity is now growing more rapidly than ever before, thanks to globalization, high rates of investment, and rapid productivity increase. Meanwhile, demand is not keeping up - perhaps because income is too unequally distributed, perhaps because consumers (outside the United States) are satiated. The result is global excess capacity, which exerts an inexorable downward pressure on prices.
To see why most economists have had a hard time taking this view seriously, consider the simple aggregate-supply aggregate-demand diagram ( Figure 1 ) that appears in virtually every principles text. What advocates of the simple excess capacity story seem to be saying is that the AS curve has shifted right, as illustrated in the figure. And this would indeed, other things equal, lead to a decline in the price level. But why should other things be equal? In particular, why couldn't the central bank simply increase the money supply, and in so doing shift the AD curve far enough to the right to prevent the deflation? And why wouldn't it do so? After all, the results of that expansion would be beneficial from all points of view: more output, more jobs, and more stable prices.
True, a country committed to a fixed exchange rate cannot freely print money even if it is faced with deflation; that is why deflation in Hong Kong or Brazil are not particularly troubling from a theoretical (as opposed to practical) point of view. But large economies with freely floating exchange rates - like Japan, or euroland, or the United States - are free to expand the money supply as much as they like. So they should find deflation easy to prevent.
But it has become clear from Japan's experience that it isn't that easy after all. Why?
2. The liquidity trap
According to the textbooks, the aggregate demand curve derives its slope from the impact of the price level on the real money supply. The standard linkage runs like this: A lower price level leads to a higher level of M/P, which leads to a lower interest rate, which leads to higher investment and hence to greater aggregate spending. Since the linkage runs through M/P, then, the curve can always be shifted up simply by increasing M. (To forestall any confusion, think of M as the monetary base rather than some broader aggregate). And since it is easy to increase M, it is easy to shift AD up.
But suppose that some link in the chain is broken - suppose, in particular, that beyond some point an increase in M/P doesn't lead to higher spending. The most likely reason this would happen is that the interest rate is already near zero, and hence cannot be driven any lower. Then it is still true that an increase in M shifts the AD curve up - but it may not shift it to the right.
Figure 2 illustrates the point. It shows an AD curve that has a normal slope over some range, but that below some critical level of prices - which is to say, above some critical level of M/P - becomes vertical, because further increases in the real money supply have no further effect on real spending. An increase in the money supply, as illustrated by the shift from AD to AD', will shift the whole schedule up; but in the liquidity-trap range will not shift it to the right. And if the AS curve turns out to put the economy in a liquidity trap, monetary policy will no longer be effective in fighting deflation.
So to make sense of an argument that suggests that the world economy as a whole, or any of its larger components, faces inexorable deflationary pressures we must also suppose that the economy is in or is about to be in a liquidity trap.
And of course Japan is in such a trap, and those worried about both Europe and the United States fear that they too may fall into liquidity traps. But let us now take a deeper look at how such traps themselves are possible.
3. Saving, investment, and the paradox of deflation
While Milton Friedman's dictum that "inflation is always and everywhere a monetary phenomenon" may be the most famous tag line in monetary economics, I have always preferred a dictum I first heard from Rudi Dornbusch: "It takes two nominals to make a real". A change in a nominal variable, like the money supply, can affect the real economy only if some other nominal variable, like wages, is "sticky" enough to give it some traction.
The converse is also true: a change in the real economy always mandates changes in the ratio of two nominal variables; one must invoke some nominal mechanism to determine how the numerator and the denominator change. Thus a growth in aggregate supply normally increases real balances, M/P; but only if M does not grow sufficiently is the result a fall in P.
So what is the sticky nominal variable that explains how changes in the real economy are translating into downward pressure on prices? In the case of countries with fixed exchange rates, the obvious answer is the nominal exchange rate. In Hong Kong what is happening is, in effect, that changes in the economy's external environment mandate a depreciated real exchange rate - or to anthropomorphize a bit, the economy "wants" a depreciated real exchange rate. Since the nominal rate is fixed, however, this can only be accomplished via a decline in the city's price level.
But how do we make sense of seemingly inexorable deflationary pressures in economies without fixed exchange rates, like Japan? Think of it this way: the real side of any economy determines a number of equilibrium relative (not nominal) prices. Among these prices is the price of current goods in terms of future goods (which is a funny way of saying the real interest rate, but bear with me). We may loosely think of this relative price as being determined by the supply of savings and the demand for investment, as in Figure 3, both drawn under the assumption of full employment.
Let us now look at the components of this relative price. Let P be the current nominal price level, i the one-period nominal interest rate, and Pe the expected future price level. Then the price of current goods in terms of future goods - that is, the quantity of future goods one must give up to consume one more unit in the present - is P(1+i)/Pe, or, writing it a bit more conventionally, (1+i)(P/Pe).
Almost everyone agrees that what is happening in Japan right now is that the saving Japanese residents would want to undertake at full employment exceeds the investment (including net foreign investment) that businesses find profitable. This means, more or less by definition, that the price of current goods in terms of future goods is above its equilibrium level, as suggested by the dotted line in Figure 3. And this is true despite the fact that the nominal interest rate is virtually zero. Clearly, the economy "wants" a lower value of P/Pe, in the same sense that Hong Kong's economy "wants" a depreciated real exchange rate. And because Pe is sticky - because people have some notion about what prices will be in the future - this adjustment is coming via a fall in P.
But a lower value of P/Pe - a lower current price level as compared with the expected future level - is the same as a higher expected future price level as compared with the present, aka expected inflation. Thus we are led inexorably to a seemingly paradoxical conclusion:
Japanese-type deflation is an economy's way of "trying" to get the expected inflation it needs.
This conclusion sounds very peculiar, but on reflection it is the same as the logic we commonly use in thinking about asset prices. Suppose that a country reduces its interest rate: this makes its bonds unattractive to investors unless they expect the currency to rise; what must happen then, as Dornbusch taught us, is that the currency must overshoot, depreciating below its long-run value in order to be expected to rise. The logic of deflation in a liquidity trap is the same: it is because spending in the current period is unattractive unless prices are expected to rise that the current price level is pushed down.
The difference, of course, is that unlike the price of an asset, the aggregate price level of an economy does not fall quickly and easily. In "trying" to generate the necessary expectations of inflation, the economy instead subjects itself to a slow, grinding process of deflation. And the great fear is that this gradual deflation may in turn get built into expectations (reducing the value of Pe) and create a self-reinforcing downward spiral.
4. Policy implications
The concern expressed by The Economist is, simply, that in the near future a large part of the world will start to look like Japan: that it will face deflationary pressures that cannot be offset simply by increasing the money supply. What can be done?
One answer is to pursue structural reforms that eliminate the savings-investment gap. Optimists believe that recapitalizing banks will do the trick for Japan. But this is a leap of faith based on very little supporting logic or evidence.
A second answer is to close the savings-investment gap with government dissaving. The trouble with this solution, of course, is that it poses problems for the long-term solvency of the government; Japan has already pretty much reached the limits of this approach.
All of which leads us to the need for unconventional policy approaches, and in particular for radical monetary policies of some kind.
As a temporary measure, monetary policy could be effective even in a liquidity trap if the central bank were to undertake open-market operations in assets other than short-term government debt. By increasing the demand for, say, long-term Japanese government bonds the Bank of Japan could surely have a positive impact on the economy even now. But while such measures would probably have a substantial short-run impact, they would only be effective in the longer term if the central bank were actually to acquire a substantial share of the relevant assets outstanding - which would raise some uncomfortable questions about the nature of the central bank's role.
The obvious answer to sustained deflationary pressures, then, is the now-notorious proposal for "managed inflation": since deflation is the result of an economy "trying" to get the expected inflation it needs, to avoid deflation one must provide that expected inflation by credibly promising that future price levels will be sufficiently high compared with the present.
And this is where I get nervous. This nervousness is not because the idea of fighting deflation by promising inflation is crazy: it is in fact a straightforward conclusion from quite standard models. Indeed, once one admits that deflationary pressures come from the persistence of a savings-investment gap even at a zero interest rate, it is hard to see how this conclusion can be avoided. But the idea sounds crazy, and that is a problem. How can we get finance ministers and central bankers, who have spent their whole careers preaching the evils of inflation and the virtues of price stability, to accept the idea that price stability may not be an available option?
For if deflationary forces are as powerful as they are in Japan - and may soon be in the rest of the world, if The Economist is right - there is no middle ground. Either policy gives the economy the inflation expectations it needs, or the economy will try to get that inflation via grinding deflation - a proposition that sounds paradoxical but is actually a matter of simple economic logic. Attempts to find a halfway house - to aim merely for stable prices rather than sufficiently high inflation - will be doomed to failure.
In short, if you really believe that deflation is now a global threat, you should also believe that only policies that lie outside the realm of what is conventionally regarded as responsible will contain that threat. And because unconventional thinking is not what one expects (or, in normal times, wants) from finance ministers and central bankers, there is now a real risk that deflation will indeed become a global scourge.
Figure 1
Figure 2
Figure 3
Knowledge is the enemy of fear
oh my, since you asked
1. keep your job, unless the next one pays at least 20% more and it is lined up.
2. take care of your teeth. And health. 10,000 steps a day. I'm 57, people I know who are my age or older who walk at least a mile after dinner are soooo much healthier looking at my age. I'm an old bag of bones. I was going to try to play seniors rugby until my knees said noway.
3. no divorce, no major car accidents.
4. wear good shoes and sleep in a good bed. Throw out bad shoes and get rid of the old bed. NOW.
as an investor, spread your risk somewhat. limit your exposure to any one thing... to 33% of your investment portfolio if you are a risk taker. Less if you're more timid. Going all in ...i.e.....silver ...is OK until the bottom drops out. And the bottom drops out of just about everthing over time. Even gold, silver, RE, stocks/bonds, land, intellectual property, commodities...you name it. You might think that going all in is smart and a 'CAN'T MISS' until it does miss and you're starting over financially. You can do this early in life but it's really tough as you get older.
The only thing you can't get back is your youth and your health. Everything else, just go buy it again.
Never give up. Always develop PLAN B before you need it. Learn from your mistakes and don't repeat them.
I also know someone who was waterboarded and tortured but it doesn't fit in the context of this thread.
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
Any advice to those in their mid 30's? >>
The same advice that was given to me years ago, "don't get old"
A specific area in which I disagree with Krugman (and most economists) is the implication that deflation has been a driver of Japan's slow economic growth for the past 20 years, and that more aggressive action to counter deflation in Japan would have led to higher growth. I think that Japan's real economic growth rate (about 1 % per year) is consistent with a highly aged society. It seems highly unlikely that higher inflation would have dramatically changed Japan's propensity to spend or led to high growth; a healthier banking system would have promoted some additional investment, but I don't think high growth was in the cards for Japan after 1990.
In general, I think economists somewhat misinterpret cause and effect as it relates to deflation. I have never seen an economic study that provides strong evidence that mild inflation inpairs economic growth. I would be interested if you could point me to one! Economists almost universally claim that deflation defers spending, but I have never seen real proof that this is the case, at least for mild inflation.
I guess what I'm gettting at is that I'm not sure while Krugman is worked up about potential deflation. While I don't view high inflation is inevitable, I am much more concerned that public policy based on high spending/low interest rates (which Krugman seems to support, to an even greater degree than has been carried out to date) will ultimately lead to imbalances in finance/trade that will be hard to correct.
it would appear from a quick glance the QEIII is a given.
good OP jmski52.
Got STACK?
Or is there just variation among the degees and types of risks that an organism faces?
Liberty: Parent of Science & Industry
No, but there's foolish behavior and less foolish behavior.
I actually had a banker friend of mine tell me the problem with the economy is the fault of the oil companies.
How stupid people get jobs related to economics is beyond me.
<< <i>CAN DEFLATION BE PREVENTED? >>
why prevent it? Deflation is a bad thing only to those heavily in debt. I welcome deflation, my fiscal house is in order.
Unfortunately, the FED wants inflation to protect an over extended Washington. FED pulls the strings on this one, get ready for higher prices.
Exit bunker, enter Matrix. LOL
Meh
<< <i>Cohodk,
A specific area in which I disagree with Krugman (and most economists) is the implication that deflation has been a driver of Japan's slow economic growth for the past 20 years, and that more aggressive action to counter deflation in Japan would have led to higher growth. I think that Japan's real economic growth rate (about 1 % per year) is consistent with a highly aged society. It seems highly unlikely that higher inflation would have dramatically changed Japan's propensity to spend or led to high growth; a healthier banking system would have promoted some additional investment, but I don't think high growth was in the cards for Japan after 1990.
In general, I think economists somewhat misinterpret cause and effect as it relates to deflation. I have never seen an economic study that provides strong evidence that mild inflation inpairs economic growth. I would be interested if you could point me to one! Economists almost universally claim that deflation defers spending, but I have never seen real proof that this is the case, at least for mild inflation.
I guess what I'm gettting at is that I'm not sure while Krugman is worked up about potential deflation. While I don't view high inflation is inevitable, I am much more concerned that public policy based on high spending/low interest rates (which Krugman seems to support, to an even greater degree than has been carried out to date) will ultimately lead to imbalances in finance/trade that will be hard to correct. >>
Well, im not saying I agree with Krugman, but I do find his thinking to be "provacative". I do agree with Higashiyama that Japan's problems are consistant with those of an aging population and this is why I think deflation is a still a real threat to the global economies. For example, the median age in Japna is 45 with 23% of the pop over the age of 65. But, did you know, in Germany the median age is 45 with 20% over the age of 65. Similar numbers can be found throughout Europe but not quite to the same extent. The biggest problem I see is that without Germany, Europe would be a complete mess. Unfortunately, Germany may be a mess in a decade. Who is going to run the factories when the Germans retire? Immigrants? And just who would those immigrants be? People think Mexicans are ruining the USA, but just think of the demographic that may "invade" Germany. Think along the lines of religion.
By contrast the USA has an average age of 36 with just 13% over 65.
I have never seen an economic study that provides strong evidence that mild inflation inpairs economic growth. I would be interested if you could point me to one!
Im not sure I can point to one specifically without doing some homework, but I do know about the role of human expectations in economics. For the past 3 generations all we have known is inflation. So why should we think differently? We shouldnt. So the expectation of higher prices (inflation) is what drives us to be a spending nation rather than a saving one. This constant need or desire to spend is what keeps our economic ball rolling. This is why Bernanke talks about inflation expections in every FED statement. He needs to talk about the continued threat or expectation of higher inflation to reinforce our need to spend.
As I look around at my neighbors or in my travels I see a tremendous amount of money spent on "junk" or frivilous items. Im sure you do as well. But it is the spending on that junk that keeps people employed. That creates sales taxes. That keeps the ecomonic ball rolling. Go the your local mall. Is there really anything in there that you NEED? If the USA just spent money on things we need, we would have 20% unemployment and be in a depression. This is what Bernanke (and the ECB) fear most. The USA and Europe are still the economic drivers of the global economy. Without them buying "junk" from China, China would still be in the 19th century. But Europe has a aged population and the USA will be with them in about 15 years. With an aged population comes fiscal restraint. Old people dont buy "spinners" hub caps or 3D televisions. As the USA and Europe adopt "austerity", the economies of China, India, Brazil, could faulter. And so could their governments. That would most certainly lead to a global depression and is why the FED, ECB, JCB are vigorously trying to keep the dollar from rising. They need to buy time so that China, India, Brazil are advanced enough to not only stand on their own, but also support slow, perhaps negative, growth in Europe. The USA still has a lot of growth ahead of itself, but is facing a pretty good speedbump in the form of babyboomers.
I've said it a hundred times, "rising prices cure rising prices". After nearly 80 years of rising prices, something is gonna give. I dont know if deflation comes next year or next decade, but I am pretty sure it will come. Perhaps inflation will end with a "parabolic" hyper inflationary stage? Proofcollection seems to think this will happen in the next 2 years. Maybe, I dont know. But if we do encounter a hyper inflationary period, it will end with the ferociousness that just hit silver. For example, maybe prices double or triple in the next 2 years, I believe we would then return to prices last seen in the 1990's (or earlier), within just a few years thereafter. The FED, Administration, Treasury and foreign central banks are playing with something that may be much bigger than they think. 7 billion times bigger.
Knowledge is the enemy of fear
MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
Groucho Marx
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
Joke #1:
You can take all of the economists in the world and lay them end-to-end, and they still won't reach a conclusion.
Joke #2:
The Physics department received a memo from the college budget office:
We are sorry to reject your request for a particle accelerator. We only have a small amount of money available for equipment and supplies, and we have many other departments to consider. Why aren't you like the other departments? All the Math department orders is chalk, pencils, paper and wastepaper baskets. And the Economics department orders the same items, but they don't need wastepaper baskets.
Proud recipient of two "You Suck" awards
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
<< <i>I've had three heated arguements with my son in my entire life. Two of them have involved Paul Krugman. The other involved Radiohead, a bad hair cut and broken curfew. MJ >>
Krugman certainly has his detractors and I dont agree with all he writes, but I do believe economics is more dependant on demographics than FED policy. I liken the FED to a tug boat pushing a tanker. While the tug may be able to alter the tanker's direction, it cannot change its course.
In another thread I mentioned the economy was a Ponzi scheme. Some thought I was talking about monetary policy. But here is the deal as it directly relates to the OP. If Americans do not spend all they make, the economy cannot operate at 100%. Any saving reduces demand which creates unemployment, which places greater strain on entitlement programs, which goes round and round. Since 1980 the savings rate has declined--reaching negative rates in 2007. This decreased saving (increased spending) is what enabled the US economy to enjoy an unprecidented boom for 25 years. That is/was unsustainable. Now the slowdown from 100mph to 90mph feels like the end of the world. It isnt.
Knowledge is the enemy of fear
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
<< <i>Economics, the Art that thinks it's a Science.
Economics is only considered a science because you need to know something about statistics.
Krugman now thinks he is an expert on all subjects, including recently the science behind global warming.
I maintain that our focus on rapid turnover, finance and forced consumption is counterproductive *to the max*, and is quite a waste of the very resources that everyone wants to conserve.
The debate is on spending when it should be on sustainability.
Politics play a major role in the mis-application of resources - in this I agree strongly with Ron Paul. I always hated "make-work" projects in school, but that's what I see in most government programs. In my opinion, anything that is "make-work" oriented is a waste of resources, when a free-market driven economy with true competition and a level playing field could do it so much better.
Getting all that to happen without protected classes, subsidies, insider deals and crony-capitalism is a major issue.
I knew it would happen.
<< <i>Economics, the Art that thinks it's a Science.
and to think my major in college was Economics...(School of Science)
i was as far from any honors in the "laud" category that it was known that my honor was "Thank Gaud"
<< <i>CAN DEFLATION BE PREVENTED? >>
This article is from 1999, not 2011.
that's rich.
derail the thread with a 12 year old article by an economist who's a legend in his own mind.
If it's 12 years old,
classic.
<< <i>
that's rich.
derail the thread with a 12 year old article by an economist who's a legend in his own mind.
If it's 12 years old,
classic. >>
Quite the contrary. You see, the USA is going the same path as Japan and Japan has been stuck in deflation since 1999. So with all the QE and debt issuance Japan has done, it has not been able to pull the country from deflationary pressures. Why should the USA think it will be so successful? When you think about it, the article was actually quite prescient.
The only thing I could be accussed of trying to derail would be the incessant talk of hyper-inflation. Perhaps an artice written by Peter Schiff (a legend in his own mind), but I still like him, would have carried more weight.
Bernanke must be staring at the mirror is bemusement. With the trillions of dollars he has spread throughout the economy, stock prices, home values, and almost all commodities, are still below the levels of 3 years ago.
I happen to think there is more than a grain of truth in Krugmans thought of an "economy getting what it wants". This country wants saving. Saving is deflationary. We will just have to wait and see if the G can continue to spend and if so whether that spending can overcome the saving from the private sector.
What is truely classic is the proclivity to interject extraneous supposition.
Knowledge is the enemy of fear
yep
Here's why a mature economy and aging population in a developed country leads to deflation: satiated consumers
It's going to be damned near impossible to sell me a car, washing machine, or television if I already have one of each that I'm happy with.
In developing (growing) economies around the world, folks are or will be getting their first one, and then their neighbors will want one too.
In a mature economy, there's a limit to those who want to consume high-margin luxury items. A satiated need does not motivate.
Liberty: Parent of Science & Industry
Savings is not deflationary. It just builds a stronger base of the pyramid. A strong vibrant economy needs good savers. Otherwise, you beg for outside capital. And that outside capital is your master. When I save, I do things with the money that does not include buying chatchkeys. I'm not interested in buying any junk . I buy land. I equipment. I do not buy paper and allow others to control where my money is spent.
When I spend my savings, others may buy junk....that's up to them. My savings are far from deflationary. They are 100% healthy from an economic perspective. I'll match my economic background up against yours or just about anybody else around here 24/7. And I don't sit in an office telling people a hundred times. I tell them once. They chose not to listen, that's their choice. If they work for me and they chose not to listen, I consider it a waste of my time to mention it again.
Japan was a saving economy long before it went into the toilet. Savings had nothing to do with it. They bought too many overpriced west coast properties from the profits of their manufacturing sector and went hog wild speculating on their own real estate. Now they pay the piper. They thought they could take their profits from cars and electronics and buy west coast golf courses and office buldings to generate an income stream and they overpaid. Not at the time, but in retrospect. No one knew commercial real estate in 1985-95 would go south except those that study cycles and profit from them. Capt. Obvious can determine when things are overbuilt. The Japanese couldn't.
You can travel 4 miles up to the 10 from my business and there are 4 million square feet vacant. Their are another 10 million feet just waiting to be built. Yet the lads at Coldwell, Grubb & Ellis, Cushman, et al are still schlepping these buildings. Some have been vacant for 3-4 years. All were predicated on cheap Chinese garbage being imported with a strong Dollar and cheap Yuan and things have changed.
If the Fed considers my savings unpatriotic, I'll save where it is patriotic.
krugman, meh.