Deflation 101
Jan 19th, 2009 by msurkan
Learn why the world is experiencing deflation, why it will last for years, and why governments are powerless to do anything about it. You can also download the slides, with charts, that accompany the audio podcast.
If you are interested in learning more about deflation you can join the Deflation Study Group on LinkedIn.
NOTE: Remember to tune into the Optimistic Bear weekly financial round-up every Tuesday at 9:00pm, Pacific Time. You can also listen to previous shows.
Our opinions diverge at the point where you start talking globally. Debt stimulates economic growth. People buy equipment, fund the purchase of goods, and provide the capital to build infrastructure.
I agree with defaltion, it is a good thing, and bail outs in the United States economy are a very bad thing. The United States has money, the people have money, we have food, resources and infrastucture. The best thing Obama said is that we all need to go to work. The days of financial engineering our economy are over. We need to, and have the ability to, work and pay off debt.
Every one in the United States needs to become familiar with the Third World. It’s one thing to talk about Japan and another to talk abiut El Salvidor or Palastine.
Great job on your presentation and your associated slides! What do you think the differences between U.S. “credit easing” and Japanese “quantitative easing” will be from an implementation and economic influence standpoint?
Thanks
Jonness wrote: “What do you think the differences between U.S. “credit easing” and Japanese “quantitative easing” will be from an implementation and economic influence standpoint?”
I don’t think there is much in the way of a substantive difference. Both nations have cut central bank interest rates to the bone and provided oodles of liquidity to the banking sectors. Both nations are (or planning to) spend heavily on public works and infrastructure stimulus. Both nations are acquiring “bad” assets.
Some of the details may vary, but nothing that really matters.
Has the money supply really increased? The contraction of the leveraged paper assets and shrinkage or elimination of the creators, sales outlets, and markets for the assets has most likely drained money from system, at least for the near term.
Inflation needs demand as you note, and restricted supply. Slack demand, extra capacity = no inflation. The money supply doesn’t matter until people are willing to bid the money for goods and services.
So does the extra money exist? Not Yet!
Good job on the presentation.