Discussion Forums > Politics
Cash for Clunkers Stimulus is a Huge Success!
nates1984:
--- Quote ---Saving during a recession leads to a vicious circle which eventually leads to deflation of our currency.
--- End quote ---
Explain why this is bad using your own words.
Go ahead, because I bet I can show error in your reasoning. In fact I'll give you a head start, because I know what some of your reasons are going to be: Demonizing deflation because it intensifies the sting of bad economic decisions is ridiculous; instead you should demonize the bad economic practices instead of the things around it that may make it worse. It's like saying wood is bad because if you throw it on a fire it makes the fire worse.
relic2279:
--- Quote from: nates1984 on August 18, 2009, 08:47:50 AM ---Go ahead, because I bet I can show error in your reasoning. In fact I'll give you a head start, because I know what some of your reasons are going to be: Demonizing deflation because it intensifies the sting of bad economic decisions is ridiculous; instead you should demonize the bad economic practices instead of the things around it that may make it worse. It's like saying wood is bad because if you throw it on a fire it makes the fire worse.
--- End quote ---
Actually, none of those thoughts crossed my mind.
I was thinking more along these lines:
"Many American households’ savings are tied up in investments that will go sour in deflation: i.e. stocks, bonds, commodities and real estate. As if a wipeout of life savings isn’t bad enough, declining prices (one of the effects of deflation), means lower profits for companies. In turn this means layoffs and increased unemployment."
Citation: The Depression. That's exactly what happened.
Not to mention:
http://www.elliottwave.com/deflationary-spiral.aspx
A deflationary spiral is as bad as, or worse than hyper-inflation. Sounds good at first, and indeed it is. But only at first.
nates1984:
--- Quote ---Actually, none of those thoughts crossed my mind.
--- End quote ---
They're probably the best arguments. >_>
The issue of debt really is the biggest concern with deflation, and you're not even using it as your argument. =\
--- Quote ---"Many American households’ savings are tied up in investments that will go sour in deflation: i.e. stocks, bonds, commodities and real estate.
--- End quote ---
Explain it in your own words. You have made a claim, now support it. Why does it go sour?
--- Quote ---As if a wipeout of life savings isn’t bad enough, declining prices (one of the effects of deflation), means lower profits for companies. In turn this means layoffs and increased unemployment.
--- End quote ---
The purchasing power of a currency would increase in deflation. Therefore, in comparative terms, it really costs the same even if the sticker price has a lower number on it. The only issue companies would face is the problem of decreasing wages so the employees receive the same comparable pay in a deflationary environment. That can be difficult to do, employees do not like having their pay reduced.
Falling prices while the currency's purchasing power remains the same is a different discussion all together, in that situation your argument is moot. In fact, that's what has happened in America (think electronics and imported products from the third world).
If you invoke deflation you automatically refer to the currency, not the price of goods, the price changes in the price of goods (in both deflation and inflation) is nothing but a reflection of what the currency is doing. This argument inherently assumes the currency's purchasing power stays the same, which is retarded.
--- Quote ---Citation: The Depression. That's exactly what happened.
--- End quote ---
Deflation didn't create the Great Depression's problems. If you think it did you're ill-informed.
--- Quote ---Elliott Wave International (EWI) is the world’s largest market forecasting firm.
--- End quote ---
Fuck commercial sources. Put up something academic. Failing that do something journalistic. Commercial sources always reek of ulterior motives.
Also: The president of EWI worked for Merrill Lynch.
Here's an article written by a professor in France who supports my views: http://mises.org/story/1254
--- Quote ---A deflationary spiral is as bad as, or worse than hyper-inflation. Sounds good at first, and indeed it is. But only at first.
--- End quote ---
Explain why in your own words. Your source is unacceptable. Also, if the "deflationary spiral" theory is true, explain why computers and other electronics notorious for becoming obsolete and cheaper in a small time frame continue to sell.
relic2279:
--- Quote ---Explain it in your own words. You have made a claim, now support it. Why does it go sour?
--- End quote ---
What do you mean by 'in my own words' ? If I want to support it, I have to find a source who says it better than I can.
These two sum it up quite nicely:
http://www.economist.com/opinion/displayStory.cfm?story_id=13610845&source=hptextfeature
http://money.cnn.com/2008/10/17/news/economy/deflation/?cnn=yes
--- Quote ---Your source is unacceptable.
--- End quote ---
One of these should tickle your fancy on the effects of deflation as well as explanations on why inflation is the lesser of two evils:
http://money.cnn.com/2002/11/07/news/economy/deflation/
http://www.forbes.com/2008/12/09/deflation-lending-saving-fan-ii-in_ags_1209soapbox_inl.html
http://www.nytimes.com/2009/04/21/business/global/21deflate.html
http://krugman.blogs.nytimes.com/2009/02/04/about-that-deflation-risk/
http://economics.about.com/cs/inflation/a/deflation_2.htm
http://www.youtube.com/watch?v=HLXhqME809E
http://blog.mises.org/archives/009042.asp
http://en.wikipedia.org/wiki/Gold_standard#Gold_standard_from_peak_to_crisis_.281901.E2.80.931932.29
nates1984:
If there's a deeper point to my challenge of you relic, it's that I'm tired of people simply repeating what they heard elsewhere and acting like it was their big brain that came up with it. One: If you don't understand something don't talk about it. Two: If you don't know about it you can't accurately judge the legitamacy of the source.
I'm not reading the hundred links you've posted. I'm not discussing it with those writers, I'm discussing it with you. Sources only work if there is a specific dispute. Sources alone can't build you an argument.
When you're ready to reply to my posts with your own words rather than trying to post a million links I'll be happy to discuss it with you. Otherwise shut up about economics.
99% of the time if someone posts a shitload of links it simply means they don't know jack about the subject being discussed.
In the time it took you to find those links you could have just replied yourself, but of course you don't know shit about the subject do you? It's ok, we'll do this slowly if need be.
Just this question relic: You have made a claim, now support it. Why do "stocks, bonds, commodities and real estate" go sour in a deflationary period?
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