Market Folly - Latest Comments in Commodity Inflation Versus Asset Deflation (Guest Post)

Re: Commodity Inflation Versus Asset Deflation (Guest Post)

Michael Jackson — Fri, 25 Jan 2013 12:54:37 -0000

“Debt soars because of unrelenting growth in federal spending on health care programs and a rise in Social Security spending” . How much of the increase was due to older workers - laid off and unable to find work - decided to retire early or went on Social Security Disability. If the job market was robust, these workers would be working instead of collecting.

Re: Commodity Inflation Versus Asset Deflation (Guest Post)

BS Detector — Tue, 30 Jun 2009 17:52:15 -0000

OK, thank you!
I also was over at Phil's web site but haven't found this article.

Historically deflation has always self corrected (by letting the market run its course => bancrupcies), the only exception being the great depression (aggravated by banking crises). Since then, on the premise of preventing the "deflationary death spiral", the fed always acted to prevent deflation, pumping liquidity into the system thus prefering potential inflation.
IMO the lesson from the 1930ies should be to maintain banking liquitity at all costs, but not to counteract the deflationary process itself, which provides the necessary "cleaning" of the system and the fastest path to a recovery.

Re: Commodity Inflation Versus Asset Deflation (Guest Post)

marketfolly — Mon, 29 Jun 2009 19:58:08 -0000

just wanted to clarify that these are not our own thoughts, but rather those of Phil, the guest author. I'll see if I can get a response from him though since you do bring up a valid point.

Re: Commodity Inflation Versus Asset Deflation (Guest Post)

BS Detector — Mon, 29 Jun 2009 15:03:16 -0000

The flaw in your logic regarding the "self reinforcing" deflationary spiral is that in a closed economic system, bancrupcies not only reduce demand but even more supply: Laid off workers still consume at least something, while producing (supplying) nada.
Therefore deflation is a self correcting cycle, not self reinforcing.
I wonder, why so few people get that.