http://classic.cnbc.com/id/100763999
Easy to say its 1% when you changing the measuring stick.
Who would of thunk the FED wants more inflation so they can monetize the debt; that is just crazy talk! :rolleyes:
These people are literally selling our soverignty off. Destroying America. It is appualing.
FUCK THE FEDERAL RESERVE!
Controlled inflation is a good thing. It is the best thing for an economy. It promote borrowing and consumption. It causes people’s pay to increase. It causes the $ value of peoples properties increase. It is great for people who take out loans for homes/cars/property etc as you are paying today’s $ for something that was purchased at last years $.
However, it has a limit, eventually every expansion has to have a contraction. And the Fed is trying their damndest to prevent a deflationary event.
I don’t think they are going to be able to do it. They are almost out of “wiggle room” in interest rates. All it will take is one or two more “events” in the world to cause a “flight to quality” and then the US dollar will become “like gold” on the open market we will see deflation. Because no matter how bad it is elsewhere in the world, the US has the best and most fisically sound economy in the world and everyone else knows that.
It will be bad for people holding long term debt. It will be bad for people with huge positions in equities. It will be bad for people with commodities.
But it will be good for people with little to no debt and a cash/bond reserve. It will be tremendous for all these companies that are sitting on billions of dollars in profits right now that have been waiting for this to happen.
We are due for some deflation (historically speaking) and while it will be hard in the short term, personally think it will be good for all of us long term.
I want to see massive deflation.
But then I have a significant amount of liquidity and very little debt. With the ever increasing purchasing power of the dollar, eventually my mortgage will be nearly worthless and be paid off at a fraction of the cost.
Yeah, unemployment will go through the roof. But again when one has plenty of liquidity and little to no debt, who needs a freaking high paying, high stress job.
Living off cash and barter baby.
What makes you think that new bills wouldn’t be issued in that scenario, making yours worthless (after they take a zero off your electronic balances). 
-bc
With the ever increasing purchasing power of the dollar, eventually my mortgage will be nearly worthless and be paid off at a fraction of the cost.
Actually in a deflationary situation, your mortgage would become increasingly more valuable because your principal would be fixed at whatever year you bought it in dollars while the value of the dollar would continue to go up. So instead of your mortage payment being costing you the equivalent of 500 rounds of 5.56, since the dollars that you hold or earn would be increasing in value, eventually you would be paying with dollars that could buy you 1,000 rounds of 5.56.
Now inflation works like you stated because your debt is in todays $ and if inflation is rising, you are using increasingly worthless $ to pay a fixed principal amount. Unless you are unlucky and have a ARM and your bank starts bumping up your interest rate to compensate.
My built a house in 1970 for $18,000. By 1980 it was paid for since by that time my Dad’s yearly income was higher than $18,000.
That is why the Fed is trying so hard to keep some inflation because if they don’t most Americans with a car payments/house payment/credit card payments/other toy payments will get CRUSHED as prices start to drop and companies start decreasing wages/laying off and people get stuck upside down on everything, on top of having to pay $ that could buy 2x as much.
Dump the Federal Reserve (its neither, btw).
Repudiate the debt.
Arrest the International Banksters and their agents.
“One man with courage makes a majority.”
The Fed is really hoping for a major uptick in the economy so they can sell off a lot of the debt they have purchased before it leads to massive inflation. Unfortunately, I do not see this happening given the bubble economy we are in. This thing is going to pop eventually and we are going to fall hard. The Quantitative Easing the government has been using has been keeping this thing artificially inflated over the past 4 years. Our recent energy boom which has led to increased energy exports and an increase in GDP will also probably keep this thing strung out for a bit longer and hopefully will soften the fall if we ever get our oil production fully online to its potential. Its not just the US, its the global economy. The debt ratio is astounding!
On a lighter note, has anyone been to the grocery store lately? I swear the prices go up weekly!
Inflation is difficult to control, but deflation is just nasty. It makes long term planning all but impossible. The problem with the Fed is that it makes everything go in slow motion. With less interference it is like ripping off a band-aid rather than slowly pulling it off.
I agree.
I really don’t “want” deflation. I would prefer a nice steady 1 or 2% inflation until after I retire since I have a 80/20 Stocks/bonds asset allocation and a small mortgage on a house and a farm.
But that being said, I don’t want to get stuck in a Japanese stagflation quagmire for 20 or 30 years and have no growth at all and while watching my Mom and others trying to live off of fixed income investments have nothing.
I am just afraid that this “easing off the bandaid” may get us stuck in an economic doldrum for a while that ends in a sudden precipitous deflationary “attack” and the Fed and other central banks have completely run out of “inflationary” ammo.
We have been seeing some deflationary indications for a while now. (Massive real estate devaluation, real wage stagnant or dropping) even with the Fed and other central banks trying desperately to stomp the “inflation gas pedal”.
I am thinking they might have been better off letting it fall off in the hole and then using interest rates to climb back out rather than trying to keep us from falling into the hole and then running out of juice before right before the momentum carries us right over the edge anyway and then not having a way to power back out of it.
Which means that I get to pay it off that much sooner and then be debt free.
Debt = slavery
In a deflation prices fall faster than the currency can be devalued. What’s the fed going to do? Print money in increasingly smaller denominations?
LOL
The e-balances are trickier, but since the purchasing power of a unit of currency grows over time during deflation, what is the point of having currency in a bank? Earned or accrued interest doesn’t mean shit at that point. Take it all out in cash.
I agree with you about debt.
But I don’t see how you will be able to pay off your house any faster in a deflationary environment. The opposite would be true, I would think, if you were relying on wage income to service the debt. Since wages usually decrease during deflationary cycles.
Can you explain?
I have enough fairly liquid assets that I am, at the moment, keeping close to my vest for retirement. However, if the signs of a deflation keep getting stronger, I can liquidate enough to wipe my mortgage and sole car payment out overnight.
I have less than $1000 in unsecured debt. I can ride out unemployment in a massively deflationary economy.
I LOL at the people who are mortgaged, financed, and leveraged to the hilt. They are the ones scared shitless of deflation. What happens to them when the bottom falls out is not my problem unless they come knocking at my door. Then they get a dose of copper-jacketed lead.
You are assuming a lot there. We have seen inflation in this country over the last few years, just not reported as such. My wages haven’t risen much in the last 4 years or so, but my bills for basic items like food and power and all that jazz have. Inflation without wage increases (which are not guaranteed) means more borrowing or less spending. The more borrowing is good for the banks, but worse for the populace. Less spending is bad for everyone as jobs tend to disappear are people cut back on their consumerism.
What am I making assumptions about?
Note that the economic impoverishment has taken place despite price level stability. Also, note that in order to achieve price stability, the Fed had to allow an increase in the growth momentum of its balance sheet and consequently in the growth momentum of the money supply.
It is the fluctuations in the balance sheet and the subsequent fluctuations in the growth momentum of the money supply that matter here. It is this that sets in motion the menace of the boom-bust cycle, regardless of whether the price level is stable or not.