Cart (0)
business newsWhy Deflation Isn't Bad
Some of the most prosperous times in American history were during periods of deflation.
PRINT
 |
|
1. Deflating prices make people less willing to spend and borrow;
2. Falling prices hurt debtors;
3. Falling wages.
Technology is nothing but a giant deflationary event and that hasn’t stopped people from buying new TVs, laptops, or iPhones (AAPL). As for people being less willing to spend/borrow, there would be plenty if people weren’t already in debt up to their necks from following this ridiculous borrow-and-spend ideology up to this point.
"Deflation hurts the position of debtors"…seriously? So yes -- let's completely destroy the entire nation's purchasing power over it. That’s a much better idea. But wait, we've already done that with the value of the dollar cratering since the creation of the Fed. Now we have a crisis of confidence over the dollar internationally with multiple nations promoting the idea of the SDR which would really crush what little value the dollar has left while rendering the US politically impotent around the world.
Regarding wages, they've risen to near-crazy levels. Why is minimum wage at $7-plus? Why are wages so high that they must fall? Because the dollar has been shot to hell through the inflationary policies preached by Krugman and those of his ideology. Deflation in this instance isn’t bad because prices are coming back into line with wages. If both are falling then the net-net isn’t as impactful or frightening as Krugman's opinion makes it out to be. Some of the most prosperous times in American history were during periods of deflation.
All in all, this ideology is a proven failure. It’s incredibly destructive as can been seen over the last 150 years of American society. Obviously, Krugman isn't a believer in hard money as I am, but hard money would prevent all of the problems we're experiencing and more. The economy doesn't need fiat money to expand. Fiat money is a tool of politicians for political patronage. That goes back to the early 1800s and Henry Clay in US history, then to Lincoln who really perfected the concept. Let's stop this idiocy by putting an end to the Fed and getting back to a commodity-backed currency that will stop these boom/bust cycles and prevent an even bigger increase in the amount of debt this nation is incurring.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
