The two big words... deflation and depression

[nadinbrzezinski]

we may be on the edge of both, and yes we saw the drop in consumer prices, largest in 61 years this month.

That kiddies ain't good news

Strap in, the ride will be VERY BUMPY

Oh and usual, link this to who it belongs, the REPUBLICAN trickle down philosophy and in this particular case, George Dubya Bush

[Taverner]

1. Inflation is bad. Deflation is bad. Stagflation is bad.

Then what's left? What's good?

[nadinbrzezinski]

10. Limited inflation is not that problematic, now HYPERINFLATION is a problem

Stagflation usually leads to a stagnant economy

And deflation leads to a myriad of problems not seen since the 1930s

I guess very limited for a limited time would not do too much damage, but long term, as bad as hyperinflation

In fact the US economy does fairly well when we have low inflation

[HamdenRice]

13. I'm having the same debate elsewhere. Economic illiteracy is so, so sad.

For most of the Keynesian era, a moderate level of inflation has always been considered a good thing. It erodes debt. It makes production profitable because prices will be higher. It increases wages. It's very biased in favor of wage earners as compared to holders of wealth. It forces wealthy people to invest in real assets rather than financial assets to protect the value of their money.

People seem to forget that before Reagan/Volcker, a moderate amount of inflation was engineered into the economy for good reason.

Now we have DUers praising Volcker as the best Fed chairman ever, while excoriating our first Keynesian Fed Chair in decades (Bernanke).

To most DUers, Reagan, Hoover = good. Kennedy, FDR, Truman, Carter = bad.

I can only repeat myself: economic illiteracy is so, so sad.

[nadinbrzezinski]

14. Add history illiteracy as well

And by the way, HI

Nice to see ya

:hi:

And I do hope Volker remembers some of the Keynseian Economics he once knew, before he took over the World Bank... where trickle down rules

[raccoon]

15. Not in my world. "It increases wages." Wages haven't been keeping up for years. nt

[HamdenRice]

16. That's the whole point!

Since the fed began putting the importance of the dollar (ie investment value) over full employment.

[nadinbrzezinski]

17. Aka when we abandoned Keynes and adopted that turd

that led to the great depression, that is trickle down economics

Amazing that this all goes back to the Reagan Revolution, just like oh the Great Depression was preceded by 25 or so years of CONSERVATIVE rule ending with Hoover

That is what I mean bout lack of knowledge of history as well

[TomClash]

2. Print More Money

Eventually it will be done. Mark my words.

[nadinbrzezinski]

3. I will not mark your words

really depends on what they choose to do

If they choose to go down the road of John Maynard Keynes, they will do that in a limited way... for the same reasons

[TomClash]

4. Read the General Theory of Money

It's more than a limited way if they follow Keynes.

It's easily the best solution.

And I did not mean the current cabal - I mean the incoming Administration.

[readmoreoften]

6. And how will that not lead to deflation?

Global economy and all that... If the dollar is worth 50 cents then the price of Chinese crap and Japanese electronics and cars doubles, the stock of asian countries still slides and our stock market follows. I'm not sure how imaginary liquidity will solve the problems of economic bubbles.

[TomClash]

11. It might lead to inflation

But who cares? We have deflation now - the most deflation since WW II ended - otherwise no one will ever pay union wages again.

The bubble already burst. If I increase M1 then by definition I increase M3, which includes other liquid assets. There's nothing imaginary about that - it means more money to pay off debt, invest and so on - in the short run.

It's not a panacea alone, but as an integral part of a broad stimulus package it will work.

It's either that or the IMF/WB type of road - no thanks. I'm not buying into some ten year austerity plan.

[nadinbrzezinski]

12. Austerity plan... now that is a nightmare most folks

don't understand in the US

And they don't work either

[nadinbrzezinski]

7. Read the theory... and I know it is the best way

now lets be honest, they printed limited amounts of money in the 1930s... they did something else which was extremely controversial as well... they cut the value of the greenback by 50%

Mark my words, that is coming too

Oh and the usual suspects (look for an R behind their name) will scream the same screeds as well

The parallels on the screams so far have been more than just amusing

[TomClash]

8. Ok, we're on the same page nt

[nadinbrzezinski]

9. We both have read history and economics then

At the end of this we will also see Bretton Woods changed for EVAH

I am betting Sarkozy's ideas will be quite popular, and we will not have that much of a say (relatively speaking)

[progressive_realist]

27. Sarkozy has an agenda that would specifically benefit France.

He is hinting at a return to the gold standard because France has the largest gold reserves. IIRC, it was France that forced us to abandon the convertibility of the dollar into gold. Up until Nixon, foreign holders of dollars could exchange them for gold, although domestic holders were prohibited from doing so. France aggressively redeemed their dollars for gold and pretty much cleaned out Fort Knox. Ironic that the country that killed Bretton Woods would now be talking about replacing it.

[nadinbrzezinski]

28. Hint, every national leader has to first care about their nation

that said, we lost the power to influence the next bretton woods agreement, which was set to benefit US

[closeupready]

5. Of course. Since money is gaining in value, why NOT print more?

What I mean, obviously, is that the know-nothings at the Treasury play these games not because they are healthy, but because they work TEMPORARILY.

[tama]

18. Economists

don't have a clue.

You can't eat money, no matter how much you print. Money is just a powerfull fetish - of power.

Even IEA promised oil crisis for the next decade. Peak Oil = Peak Food. Hungry don't act nice.

In order to avoid the worst, you need a system that is not based on continues growth, but able to distribute growing scarcity more evenly. Then build economy that is really sustainable. Not more money and debt.

[nadinbrzezinski]

19. Yes they do... but that is a whole different matter

by the way the best economy is a mixed economy... and US (as well as European) history prove it

I know you believe people with pointy heads and ahem, education are ignoramuses, yes I've read your posts

Now what you propose is actually a MIXED economy, so how's that for irony?

Oh wait, a man by John Maynard Keynes beat you to the punch by some decades

Did I mention he was an economist? Oh wait, a brilliant one

[tama]

20. No

The problem with economics is that it is totally detached from the physical world of which it is part despite the denial. Therefore it's not science but dogma, pure ideology. In physical world (aka nature) a system cannot grow continuously in a limited environment.

Hence, all economies (including "mixed") based on ideology of growth, are inherently suicidal. Only viable economy is enviromentally sustainable economy.

[nadinbrzezinski]

22. Read Maynard Keynes

then come back to me

IN fact some of that (seeds) are also part of the Wealth of Nations

Now if you talk of MODERN trickle down, consumerist based economic systems you MIGHT (and do) have a point

But until CONSUMERISM emerged, '55 or so.. the beginning of the end for pure keynseian systems, there was a certain concern with working within the natural system

By the way, what you posit is also dogma.. how bout that?

[tama]

24. What I posit

is what Club of Rome posited in "Limits of Growth". And the fact that any system based on taking interest (usury) is forced to grow by at least the amount of interest is not dogma, it's simple mathematics.

[nadinbrzezinski]

25. Club of Rome is Keinseian

very much so

:-)

[girl gone mad]

23. You're way too up on Keynes.

Even Keynes wasn't a Keynesian by the end of his life. You might try reading some of his later work. He realized the limitations of government intervention.

Keynesian economics will not cut it in this crisis. Government intervention is necessary, but can only do so much.

[HamdenRice]

30. So you think money is based on "nothing"?

Consider this: If you have a job and pay taxes, and the total tax burden is around 25%, that means that from January through March you worked for federal state and local taxing authorities.

The federal government issues money, and the money is based on its ability to command resources with that money by purchasing. It get its money by taxing.

So in effect, the physical basis of money is the government's ability to requisition your work for 1/4 or more of the year. It's based on very real physical things -- all the goods and services that you don't consume while the government is requisitioning them from you.

[tama]

31. Money as debt

http://www.youtube.com/watch?v=vVkFb26u9g8

Even that presentation does not get to the bottom of debt - enviromental debt due to the folly of "commanding resources".

[girl gone mad]

21. Actually, it's great news..

at least for the short term.

Unless you're over-leveraged with debt, deflation should help ease the economic burden a bit. This was a completely predictable outcome of the dollar collapse and hyperinflation we've had over the last 10 to 30 years.

[unblock]

26. the only thing that's really coming down is energy.

take away the massive recent drop in energy prices and we don't have anything surprising for country in a recession.

the deflation scare is way overblown.

[nadinbrzezinski]

29. It is? Okie dokie, I guess the stats are wrong then

[barb162]

32. Natural gas and food prices haven't dropped that I have noticed.

Petroleum and other energy commodities have dropped amazingly fast.