ukyo116_IHB
New member
I was always told that deflation is a bad thing because falling prices freezes up an economy. But what if you have no debt and have saved all your life? Doesn't deflation mean your money goes that much farther?
recession fears
- Thread starter bluemoon_IHB
- Start date
NEW -> Contingent Buyer Assistance Program
OK, Adam, imagine you are sitting on a chunk of cash because you sold your house at the top of the bubble.
Because you have read this site, you realize that real estate is going to be a bad investment for a while. Therefore, you decide to start your own business - Adamco.
Because Adamco is a new business, you research the market for your product or service. And if you do your research well, you find that in the (hypothetical) deflationary environment you are in, by the time you are ready to provide your product or service, the price for that product or service will be lower than it is today.
This causes a problem because you have to get an office (or factory) and computers (or machinery) and employees at today's prices. But by the time your business is ready to meet an unmet need, you'll be selling those goods and services at tomorrow's (reduced) prices. You may not be able to make a profit at tomorrow's reduced prices. Or if you could, the profit would be lower than what you would make if we weren't in a deflationary environment.
So you ask yourself "Why not just wait until next year to start Adamco? After all, I can build the same business cheaper then."
And you could.
But if deflation still hasn't been broken, then putting it off another year next year makes economic sense too.
Therefore you don't hire any direct (or indirect) employees to get Adamco off the ground.
The deflationary conditions that cause you to postpone the start of Adamco aren't unique to Adamco. They apply to every existing business and startup of someone's dreams. And as a result, a lot of people don't get hired for direct and indirect jobs.
It's the kind of thing that spirals on itself.
Looked at the numbers I posted earlier. The Great Depression was the last deflationary cycle this country has faced. Unemployment was 25%. Wages of people who stayed employed fell 42%. GDP was almost cut in half.
I'll take inflation any day over deflation. (And yes, that would apply to a hyper-inflationary environment too)
Because you have read this site, you realize that real estate is going to be a bad investment for a while. Therefore, you decide to start your own business - Adamco.
Because Adamco is a new business, you research the market for your product or service. And if you do your research well, you find that in the (hypothetical) deflationary environment you are in, by the time you are ready to provide your product or service, the price for that product or service will be lower than it is today.
This causes a problem because you have to get an office (or factory) and computers (or machinery) and employees at today's prices. But by the time your business is ready to meet an unmet need, you'll be selling those goods and services at tomorrow's (reduced) prices. You may not be able to make a profit at tomorrow's reduced prices. Or if you could, the profit would be lower than what you would make if we weren't in a deflationary environment.
So you ask yourself "Why not just wait until next year to start Adamco? After all, I can build the same business cheaper then."
And you could.
But if deflation still hasn't been broken, then putting it off another year next year makes economic sense too.
Therefore you don't hire any direct (or indirect) employees to get Adamco off the ground.
The deflationary conditions that cause you to postpone the start of Adamco aren't unique to Adamco. They apply to every existing business and startup of someone's dreams. And as a result, a lot of people don't get hired for direct and indirect jobs.
It's the kind of thing that spirals on itself.
Looked at the numbers I posted earlier. The Great Depression was the last deflationary cycle this country has faced. Unemployment was 25%. Wages of people who stayed employed fell 42%. GDP was almost cut in half.
I'll take inflation any day over deflation. (And yes, that would apply to a hyper-inflationary environment too)
etheran_IHB
New member
Ukyo116,
Sorry, I didn't mean to offend to Japanese. I am just talking about failed fiscal and monetary policies versus a successful one.
Nonetheless, anyway you cut it, Japan did a horrible job and required a 0% interest rate for a long, long time to even have minor GDP growth. I wonder how fast your savings will grow with 0% interest rate.
Sorry, I didn't mean to offend to Japanese. I am just talking about failed fiscal and monetary policies versus a successful one.
Nonetheless, anyway you cut it, Japan did a horrible job and required a 0% interest rate for a long, long time to even have minor GDP growth. I wonder how fast your savings will grow with 0% interest rate.
ukyo116_IHB
New member
I guess then you don't want either of the two evils (inflation/deflation) in a perfect world. Thank you for the explanation on deflation WINEX.
Etheran - If my money could buy the same amount of groceries and gasoline that I need to get through my day, I wouldn't mind having it not grow. In particular, if my money could afford 1 bedroom in irvine, i'll take the 1 bedroom over 5% APY anyday.
Etheran - If my money could buy the same amount of groceries and gasoline that I need to get through my day, I wouldn't mind having it not grow. In particular, if my money could afford 1 bedroom in irvine, i'll take the 1 bedroom over 5% APY anyday.
No_Such_Reality_IHB
New member
<p><em>Sorry, I didn't mean to offend to Japanese. I am just talking about failed fiscal and monetary policies versus a successful one.</em></p>
<p>$110 a barrel oil, $4+ gallon of gas, $3.5 half gallon of milk, wheat and corn up 30%+ </p>
<p>You call this a successful monetary policy.</p>
<p><em></em></p>
<p>$110 a barrel oil, $4+ gallon of gas, $3.5 half gallon of milk, wheat and corn up 30%+ </p>
<p>You call this a successful monetary policy.</p>
<p><em></em></p>
reason_IHB
New member
buy gold.
etheran_IHB
New member
Wake up No_Such_Reality,
A commodity boom occurs every now and then and there will be a bust. Similar with housing and everything else. Stuff just do not grow rationally in a nicely upward sloping line. People just get irrationale and speculation takes place. Why don't you take a look at how commodity prices have increased over the long-run. On real term prices, oil might just be back up to trend (I do not remember the exact numbers). I do not love inflation anymore than you do - remember Germany?
Ukyo - if you don't want your $$ to grow then that is unfortunate. Sorry to hear that. I can't really respond to that. Ohh keep in mind - wages aren't growing either...
A commodity boom occurs every now and then and there will be a bust. Similar with housing and everything else. Stuff just do not grow rationally in a nicely upward sloping line. People just get irrationale and speculation takes place. Why don't you take a look at how commodity prices have increased over the long-run. On real term prices, oil might just be back up to trend (I do not remember the exact numbers). I do not love inflation anymore than you do - remember Germany?
Ukyo - if you don't want your $$ to grow then that is unfortunate. Sorry to hear that. I can't really respond to that. Ohh keep in mind - wages aren't growing either...
ukyo116_IHB
New member
etheran - what I was getting at is that I want the purchasing power of my $$ to remain stable to buy goods that i need. the dollar is buying less and less oil everyday. I don't mind oil going up (i ride my bike), but I am worried about the rest of my neighbors who drive big trucks and suvs.
no_vaseline_IHB
New member
<p>I dunno about that.</p>
<p>We've had surplus energy/food/labor for the better part of 25 years or so on the planet.</p>
<p>For the first time in a long time, prices are up becuase of demand.</p>
<p>We've had surplus energy/food/labor for the better part of 25 years or so on the planet.</p>
<p>For the first time in a long time, prices are up becuase of demand.</p>
etheran_IHB
New member
Unfortunately, a dollar today in almost all cases is worth less tomorrow. Just got to live with it so you need to know where to deploy your money.
Talking about gas prices, I went to Costco the last few weeks and boy the gas pumps stations were lined up. Gee whiz, people are trying to save an extra dollar or two. I have not seen so many BMW and other high end cars at a Costco pump at the simultaneously at once.
Talking about gas prices, I went to Costco the last few weeks and boy the gas pumps stations were lined up. Gee whiz, people are trying to save an extra dollar or two. I have not seen so many BMW and other high end cars at a Costco pump at the simultaneously at once.
ukyo116_IHB
New member
I never thought I would see the total purchase price of gas to go into the $100's. Those SUV's hold a LOT of gas.
I also hear reports that all the holiday gift cards from this past Christmas are being used to purchase groceries.
http://www.msnbc.msn.com/id/23046118/
Btw, gift cards hold a danger of not being redeemable. Just ask anyone who has gone to Sharper Image.
I also hear reports that all the holiday gift cards from this past Christmas are being used to purchase groceries.
http://www.msnbc.msn.com/id/23046118/
Btw, gift cards hold a danger of not being redeemable. Just ask anyone who has gone to Sharper Image.
lendingmaestro_IHB
New member
I think companies are going to have to start providing cots, and sleeping quarters for their employees. This will prevent them from having to drive back and forth.
xtreeter_IHB
New member
<p>During the so called deflationary decade, most of Japan's average citizens have actually seen their standard of living improved. True, the GDP, wage growth, corporate profit, stock market, and property value have suffered. But its only economic statistics and nothing more to most Japanese people living their lives. Standard of living is what people care about. If it's good for most people, how bad can it be?</p>
xtreeter_IHB
New member
<p>Just want to clarify. Deflation for Japan was OK, because it did not lead to a collapse in employment. Deflation will not be OK for the US, since our economy is 70+% based on consumption assisted by financing. Deflation will make existing debt to expensive to carry. A prolonged deflation will no doubt destroy our economy.</p>
hangpilot_IHB
New member
OK, I'm confused. I don't know what scenario I should root for. I sold my house at the peak of the bubble Oct 05. Put the money in mostly tax free bond funds. Safe and liquid. I will only use that money for another house. With housing deflation, it feels like my return is over 13 percent a year, tax free, assuming I buy again in OC. But if I need it to buy gas, I'm losing big time. So I would love wage and equity inflation. I don't know what team to join.
EvaLSeraphim_IHB
New member
Buy oil futures?
brealiving_IHB
New member
<p>Its here....from WSJ.com</p>
<p>"The US has finally slid into recession, according to the majority (71%) of economists in the lastest survey, a view that was reinforced by new data showing a sharp drop in retail sales last month."</p>
<p><a href="http://online.wsj.com/article/SB120534519452630845.html?mod=hps_us_whats_news">Link</a></p>
<p> </p>
<p> </p>
<p>"The US has finally slid into recession, according to the majority (71%) of economists in the lastest survey, a view that was reinforced by new data showing a sharp drop in retail sales last month."</p>
<p><a href="http://online.wsj.com/article/SB120534519452630845.html?mod=hps_us_whats_news">Link</a></p>
<p> </p>
<p> </p>
acpme_IHB
New member
technically we're not in recession until the NBER says we are. most likely they won't announce that we were in recession in 2008 until 2010. by then there's a chance we'll be recovering from the recession (maybe?) but they won't announce that until 2012, which will unfortunately cause the next president to lose his/her bid for a second term. the incoming president will take credit for the economic recovery, in particular a phoenix-like resurrection of the housing mkt. realtors will say i told you so and laugh at articles written by IR in 2007. also, we will still not have the flying cars that every book and movie made about the so-called future since 1900 has predicted we will have by now.