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Post by avordvet on Sept 19, 2012 4:55:58 GMT -5
Deflation's Here, and the Downward Spiral Has StartedBy Frank Ryan, September 18, 2012 Denmark, Germany, Switzerland, and Finland have been issuing short term government notes at negative interest rates since mid-year 2012! This dangerous precedent has happened before. Most recently, Japan experienced negative interest rates in the 1990s. The effects of the economic quandary in Japan and the efforts to restore growth were so misguided that the Japanese are still attempting a recovery. In almost twenty years, Japan has yet to make a full economic recovery. The United States and the European Union are next and are headed into the same disaster as Japan unless decisive action is taken now. www.americanthinker.com/2012/09/deflations_here_and_the_downward_spiral_has_started.html
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Post by milton6994 on Sept 19, 2012 7:36:49 GMT -5
The author, Frank Ryan, implies that deflation is happening right now across the board. But I would argue this is not really the case. Deflation is defined as removing money from the money supply. This tends to increase the buying power of the dollar. If this were the case, the prices of gold and crude oil would be falling in the long term. This is simply NOT the case. Gold and oil are up. Ryan points to the real estate market as a prime example. It's true, the prices of homes have fallen, but this is not because of deflation. It's because of the law of supply and demand. The areas hurt the most have the most foreclosures and the least new construction (excess supply). In combination with low demand, prices have to drop to attract buyers.
Inflation, on the other hand, is adding money (printing) to the money supply in an effort to stimulate the economy. This tends to decrease the buying power of the dollar. Bernanke's QEIII is just that. Nearly everything I buy is going UP in price - gas, food, electricity, clothes, etc. Do you think this is because of demand in a hurting economy? Not likely. It's because of what Obama and Bernanke continue to do - print and borrow money they don't have and inject it into the money supply, thus lowering the buying power of the dollar. It's not that prices keep going up. It's that the value of the dollar keeps falling. I see no evidence that any money is being removed from the money supply.
I respectfully disagree with Mr. Ryan's argument.
OK. All you experts tell me where I am wrong.
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Post by Michael Downing on Sept 19, 2012 10:43:45 GMT -5
I tend to agree with you that we are still in an infflationary period and gas and food prices are clear examples of that. I also agree that the real estate price drop is due to more houses than could possibly be sold especially in a market where it is extremely hard to get fianacing. Of course true to course the inflation leads to stagnation and then deflation before it is all over...
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Post by brocktownsend on Sept 19, 2012 11:59:44 GMT -5
the real estate price drop is due to more houses than could possibly be sold
The house I bought in Fallbrook, CA in 1999 for $225K and sold in 2002 for $295K (After installing central air) is valued at $433K today which is down from a high of $599K, so houses in some areas are still way overpriced.
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