[Samseau]

(02-04-2013 12:51 AM)T and A Man Wrote:  

(02-02-2013 11:06 PM)Samseau Wrote:  

People without jobs suffer even more hardcore in inflationary periods, because not only can they not get jobs but they also will find that their paychecks can't buy them shit.

??

They don't suffer a smuch as peole with no jobs. Purchasing power goes to zero, it doesn't apporach zero like inflation.

As I just said, it already is zero.

No, you miss the point. Unemployment is just as bad with high deflation as it is with high inflation.

The only difference is, when people DO manage to land a job in a deflationary environment, they will have a more valuable currency to spend.

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The poorest countries in the world are the ones that have high inflation.

There isn't a country with deflation that doesn't eventually recover.

I would agree with that. But I am defending poor who typically have to pay a disproprtionally large burden for deflation.

For every critique of inflation, there is an equal critique of deflation, when governments defend a privileged class.

A poor person can have a wider array of options when they have a job.

Again, the jobs thing is a misnomer - a healthy job environment has nothing to do with deflation or inflation. Excessive amounts of either will kill a job market.

Poor people do better in deflationary environments, because deflation lays the groundwork for a more healthy, and robust economy, as opposed to inflation which wastes away all assets.

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Keep reading for proof:

That's because you had a credit bubble where the banks were bailed out "in order to prevent massive deflation".

Bailouts = Massive government intervention (which is bad).

I never stated otherwise.

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Remember Iceland? Iceland went bankrupt in 2008. They decided that bailouts for banks was retarded. They defaulted on all their loans and the value of the Icelandic Krona went to shit. People were unemployed for a few years.

But after a brief dip, how are they doing today?

http://www.zerohedge.com/news/2013-01-26...ning-davos

http://www.zerohedge.com/news/2013-01-26...ning-davos

Their debts are being repaid well ahead of schedule.
Unemployment is half of what it was in 2008.
GDP growth has been higher than almost any other developed nation.
Fitch ratings have been restored to investor grade.

OK, but that's not prolonger deflation...I agree the most effective way to fix a crisis is for the standard method of repudiating debt.

Bankruptcy and default. Lenders take possession of secured assets, and then everything goes on its way again.

That's not a deflationary environment.

Yes it is, Iceland went through extreme deflation after they went bankrupt. First the bankruptcy destroys the value of the currency, which is inflationary, but in the ensuing months and years without any printing of additional currency deflation is the norm as prices fall to clearing levels.

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Europes, particularly greece, is a deflationary environment with its austerity programs.

Japan's 2 decade long death by a thousands cuts is a deflationary environment.

Cutting your losses sees one accountig period of asset price decline, then rises again.. there is a reason a reccsion has been defined as two successive accounting periods of decline.

Greece and Japan aren't deflationary, because the governments are printing mad cash to paper over bad debts. In Greece's case, it's the ECB.

These countries suffer from biflation, where some asset prices are propped through money printing, keeping the prices artificially high, in order to help special interests (i.e. banks), yet the general economy suffers deflation from the lack of currency due to widespread defaults among the general populace.

Had these countries made the right move, and let EVERYONE go broke at the same time, the reset button is pushed and prices immediately fall to market-clearing levels.

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Thus, deflation is a natural consequence of not bailing out the rich. It helps the poor in the long run, the only thing they need is some welfare to survive until the economy sorts itself out again.

You're not aligning properly debt repudiation with deflation.

Deflation is an event of a prolonged time-frame. Resetting prices with deault sees the future horizon pointing to upward prices and or production. Deflation sees the horizon of lower prices.

The best welfare you can give any person is a job.

I don't think you understand what causes deflation.

Deflation is caused from two things:

- An increase of goods/services relative to the supply of money
- Private citizens who default on their debt

Inflation is caused from two things:

- An increase of money relative to the supply of goods/services
- Public entities (such as governments) who default on their debt


Deflation does not need to be prolonged. It can happen quickly or slowly, and if it happens slowly I think the effects are good for the economy. People will have greater purchasing power and will be able to buy foreign investments quite easily.