deflation, what is the worry?

[ruffryder]

Why is the fed so worried about deflation? Anyone have any insight? Are they worried that we will be the next Japanese economy and be stuck in the doldrums?

I am curious as to what the main issue is that they are trying to prevent. The thing that I see with deflation is that loans become for expensive (the amount of money you owe stays the same, but the value of each dollar increases). Savings accounts would benefit though.

 

[Mafesto]

I initially thought I understood, but the more I read & listened the dumber I felt!

Very good question.

 

[swampwater]

Thomas Jeferson
If the American people ever allow private banks to control the issuance of their currency, first by inflation, and then by deflation, the banks and the corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their father's conquered."

enough said! Swampy

 

[ruffryder]

Thomas Jeferson
If the American people ever allow private banks to control the issuance of their currency, first by inflation, and then by deflation, the banks and the corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their father's conquered."

enough said! Swampy

So you don't know either?

Besides that some old guy said it was bad?

 

[Mafesto]

So you don't know either?

Besides that some old guy said it was bad?

"Some old guy"?

The difference between our country's founders & todays politicians.........
Our forefathers made decisions based on what was good for our country for the long haul.
Todays politicians make decisions based on short term gain & what will get them votes and/or line their pockets.

If Jefferson said it, it likely still applies today & will in 200 years.

 

[ruffryder]

"Some old guy"?

The difference between our country's founders & todays politicians.........
Our forefathers made decisions based on what was good for our country for the long haul.
Todays politicians make decisions based on short term gain & what will get them votes and/or line their pockets.

If Jefferson said it, it likely still applies today & will in 200 years.

misread emoticon... you are right about short term stuff though...

anyways, the quote does nothing to explain the WHY of the situation.

 

[DOO DAWG]

Thomas Jeferson
If the American people ever allow private banks to control the issuance of their currency, first by inflation, and then by deflation, the banks and the corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their father's conquered."

enough said! Swampy

An OLD guy that put himself and his in INCREDIBLE jeopardy so that the Libtards of today can try to ruin what he and his contemporaries built the foundation for.

 

[ruffryder]

So I take it none of us knows why but since it has been said by someone important it must be true..

This reminds me of Idiocracy... "It's got electrolytes".. lol

 

[Rattlin_Ram]

http://seekingalpha.com/article/227413-why-is-deflation-bad

 

[swampwater]

So you don't know either?

Besides that some old guy said it was bad?

Well I guess it is not enough said for Ruffy whose fame in history will probably not be as great as Jeffersons slaves. Well if you need more info this should let you know what is really happening and why Jeffersons words are as timely today as they were over 200 years ago.

Debt-based money is being destroyed by credit contraction led defaults. On the real accounting books, not the ones used to produce government statements for public consumption, the amount of dollars being destroyed currently exceeds the amounts of new fiat dollars coming into the system. Basket cases for the last few years, the US dollar, and to an even greater extent the Japanese Yen, are zooming up against all other fiat currencies, oil and gold.
In an environment of both de-leveraging and deflation, rather than launching a new wave of money creation to free up frozen credit markets, the FED and its co-conspirators are currently buying up distressed companies and properties with their new bailout bill credits.
The endgame looks like this: After they have acquired full ownership and title from the weak hands of leveraged debtors who built their portfolios on margin and cheap credit, the serious new money creation will commence.
Those who will have just completed scooping up ownership and control for pennies on the dollar, will turn around and pay off their own new debts they took on in the process with inflated or even hyper-inflated dollars. It's good to be king.
One monkey wrench in the system could be the Arab dictators we have been propping up and the communist Chinese central bank made rich from all the manufacturing companies we helped create under its control. Together, this team, if they are not totally in league with the criminals who set this mess up in the first place, might decided to create a new monetary system sans the USD.
There is no honor among thieves.
Could a world reserve currency like a gold backed Dinar be in the works? Swampy

 

[ruffryder]

swampy, your example was about inflation, wasn't it?

 

[TIM]

in the long run, everything is worth less. Your pay is worth less, your house, your car, etc etc. Deflation might be a good thing in the short run in the micro econmomic standpoint, but is a bad thing in the macro long run standpoint.


Jefferson is a very smart man. But in todays world i don't see how you would or could get rid of the federal reserve.

tim

 

[swampwater]

swampy, your example was about inflation, wasn't it?

That is the end game, were not there yet. How could squeezing and contracting the money supply be inflationary? The defination of inflation is an increase in money supply and credit allowing more money availlable to purchase a given supply of goods. Swampy

 

[dgreet77]

Deflation increases the value of a single dollar. When a country is ~14 trillion dollars in debt, why pay that debt off with dollars that are worth a lot? Think about it, inflate the value of the dollar to where its worth almost nothing, pay off all the debt with dollars that aren't worth a damn. Then buy back all the cheap dollars and burn 'em, re-deflate the dollar to where its worth something again and come out on top.

It won't work overnight but spread it out over 50 years or so and blame the poor economy for having to print all the money and who's the wiser?

It won't be good for citizens, but the government can scam the world this way.

 

[ruffryder]

Deflation increases the value of a single dollar. When a country is ~14 trillion dollars in debt, why pay that debt off with dollars that are worth a lot? Think about it, inflate the value of the dollar to where its worth almost nothing, pay off all the debt with dollars that aren't worth a damn. Then buy back all the cheap dollars and burn 'em, re-deflate the dollar to where its worth something again and come out on top.

It won't work overnight but spread it out over 50 years or so and blame the poor economy for having to print all the money and who's the wiser?

It won't be good for citizens, but the government can scam the world this way.

I agree with your example, though inflation is good for citizens, as it makes long term loans cheaper, by paying off loans near the end term with "cheaper" dollars rather then more expensive ones due to deflation.

Though, the question still remains, what is so bad about deflation? There are several examples of inflate then deflate, but what about just simple deflation. I have heard that the feds job is to keep inflation at a certain level and that deflation was very bad for an economy. So is it just as simple as it makes long term loans more expensive and therefore makes credit more expensive, making it difficult for businesses to borrow their way to prosperity?

 

[ruffryder]

anyone else got any thoughts?