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Reasons why low inflation is good!
MGLICKER
Posts: 7,995 ✭✭✭
A couple of fed members are whining this morning about deflation. As if we have magically gone from 7% annually to a negative.
Good thing that oil has dropped as most all of us fill the tank. Will that really lead to genuine deflation? I don't expect medical, education or groceries to take a real fall in the next 12 months. We will see.
Why low inflation is good.
1. The fast food workers earning $9 will now get a breather from the near double digit numbers on the last couple of years.
2. Retirees getting hosed with near zero interest rates and way understated SSI cola increases will now get a breather from rapidly escalating prices.
3. Lower fuel costs allows the consumer to purchase more of the other stuff. Good for the consumer.......good for retail.
4. Hopefully take some air out of the increases in housing costs. Perhaps the average family man can once again own a home.
Good thing that oil has dropped as most all of us fill the tank. Will that really lead to genuine deflation? I don't expect medical, education or groceries to take a real fall in the next 12 months. We will see.
Why low inflation is good.
1. The fast food workers earning $9 will now get a breather from the near double digit numbers on the last couple of years.
2. Retirees getting hosed with near zero interest rates and way understated SSI cola increases will now get a breather from rapidly escalating prices.
3. Lower fuel costs allows the consumer to purchase more of the other stuff. Good for the consumer.......good for retail.
4. Hopefully take some air out of the increases in housing costs. Perhaps the average family man can once again own a home.
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Interest isn't directly tied to inflation but it's hard to sell 10-30yr bonds that pay 2-3% if inflation was higher.
I don't think they truly want it to go up much regardless of the targets they mention.
They talk about letting the short term rate go up next year but they add the caveat that the world economy being slow could delay the increase and it's already slow. Then beyond that is going to be the next election, I doubt they'll rock the low interest boat before the election. My guess is that rates stay low at least until the election and probably a lot longer, however long they can keep them low.
Shouldn't the fed be happy with low inflation and low interest?
Plus, get used to global secular stagnation. Low interest rates will remain in place for a very long time.
Price levels, rising or falling - either one - are artifacts that can be good or bad. It depends on how the economy is treating the people that's either good or bad. Inflation or deflation discussions are a smokescreen to take attention away from how government policies are affecting people's lives. Right now, people are being driven into debt, lower paying jobs, and government assistance - all because of government mismanagement and pervasive government interference. That isn't good.
I knew it would happen.
<< <i>In ref. to #3. While gas may drop .20 per gal. it really does not put that much back into the econ. for many indiv. .20 x 25 gals = only a $5.00 bill. >>
It is not reflected at the pump yet but West Texas is down $20 a barrel in a few months which translates to 48 cents per gallon. Not a fortune in the greater scheme, but certainly cheered by middle class and below folks that are getting by. About $500 a year if the prices hold.
As incomes are barely budging, the break in fuel prices takes some of the pain away and can compensate partially for rising grocery prices.
As far as the jobs are concerned, too damn bad. It is an artifact of what is remaining of Capitalism in America......well at least until the admin begins bailing out the frackers.