RE: Understanding Deflation and our economy woe's finally!

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blacksword404 -> RE: Understanding Deflation and our economy woe's finally! (12/22/2008 1:35:05 PM)
quote: ORIGINAL: ArticMaestro The only way FDIC is going to fail is in a general collapse of the economy/ Government, Hmmm. Roman, Grecian, Persian, Holy Roman, British.

Musicmystery -> RE: Understanding Deflation and our economy woe's finally! (12/22/2008 1:35:50 PM)
quote: ORIGINAL: ArticMaestro True, if your money is in your mattress, the bank failing will not matter. And of course if your home burns down (or there is a flood, ect), you can claim the 100,000$ stuffed in your mattress, and of course the insurance company will replace it..... The only way FDIC is going to fail is in a general collapse of the economy/ Government, which would leave you with a mattress full of green toilet paper. Really not. Currency isn't money. It's an IOU from the Fed. FAR more money exists than currency. And, those IOUs fluctuate in value (purchasing power) whether in the bank or in the mattress. As for the silly insurance claim--good luck with that. So like it or not--economic events affect you. As to FDIC failing--that would take the collapse of the U.S. government, and while I do believe the U.S. will be knocked down from the top of the hill, that kind of catastrophic failure isn't likely, as U.S. financial obligations will still backed by the labor, goods and taxing power of the U.S. If such bizarre a failure occurs that none of that matters, currency will be the least of our woes.

TheUtopian -> RE: Understanding Deflation and our economy woe's finally! (12/22/2008 4:42:55 PM)
quote: ORIGINAL: SilverMark Deflation isn't just the decrease in the supply of money....it is a decrease in the value of things....with the exception of the Austrian school of economics....and those like Variation who seem to be strict Austrian are about the only ones who believe that to be the case. Stag-deflation is what the larger worry is in our case. More or less the decrease in intrinsic value of the means of production as well as goods produced,a deflationary spiral or glut of items that no one will or can buy is a larger issue for our economy. While you have a component of deflation - in that there's been a contraction with regard to the issuance of credit, the exact opposite is true with regard to a contraction of the money supply. In fact, quite to the contrary, the money supply has been expanded exponentially. http://www.federalreserve.gov/releases/h41/ You can visit the link above and see for yourself that during the four week period from late September to early November, the total factors affecting reserve have gone from roughly 980 billion to 2.1 trillion. So, in simply a four week period, they've doubled the monetary base of the United States. To the folks of collarme : In plain words...That's inflation. What you're seeing here---in my opinion--- with regard to falling prices - Is a massive '' commodity deleveraging'' operation/exodus conducted by investment banks and hedge funds whose investors are fleeing and seeking redemption. Essentially every time one-billion dollars in cash is redeemed out of one of these hedge funds, they have to liquidate forty to sixty-billion in asset value to cover such highly leveraged spreads. You can begin to understand how these commodities are so artificially inflated when they're allowed to purchase at such ridiculous spreads. Hell.....I don't know what term I would use...I guess you could call it a Deleveraging/Deflationary ''hybrid'' effect....or something like that. [;)] - R

ArticMaestro -> RE: Understanding Deflation and our economy woe's finally! (12/22/2008 5:37:52 PM)
Blacksword, I didn't say that it was impossible to happen, just that if it did, the cash in your mattress, would be nothing but green paper. Hence keeping it in your mattress is a silly idea. Though I don't think British belongs on that list, when did thier cash cease to have any value? The idea that anyone who actually thinks everything is going to collapse, would waste time hoarding cash and chatting on line is kind of ridiculous. If you really think it is coming, you need bullets, beans, water filters, extra coats, Armagedon bunker, a functioning militia to defend it, ect... Not a mattress full of cash. Musicmystery, I didn't say anything about the difference between currency and money, did you have a new tangent to bring up?

Lordandmaster -> RE: Understanding Deflation and our economy woe's finally! (12/22/2008 6:52:01 PM)
Ummm, you've got that backwards. Say my Toyota is worth $1,000 today and we're in a period of hyper-inflation. I sell it today for $1,000--which will buy me a bowl of pasta tomorrow. I am a seller, and I got fucked. Now say we're in a period of deflation. I sell my Toyota today for $1,000--and before long I can buy a condominium with that. Whoever BOUGHT my car got fucked. quote: ORIGINAL: MrRodgers With the paper-trading that capitalism is...during inflation...the last buyer is the one who gets fucked. If prices fall, deflation...the last seller gets fucked.

MzMia -> RE: Understanding Deflation and our economy woe's finally! (12/22/2008 6:54:13 PM)
quote: ORIGINAL: Lordandmaster Ummm, you've got that backwards. Say my Toyota is worth $1,000 today and we're in a period of hyper-inflation. I sell it today for $1,000--which will buy me a bowl of pasta tomorrow. I am a seller, and I got fucked. Now say we're in a period of deflation. I sell my Toyota today for $1,000--and before long I can buy a condominium with that. Whoever BOUGHT my car got fucked. quote: ORIGINAL: MrRodgers With the paper-trading that capitalism is...during inflation...the last buyer is the one who gets fucked. If prices fall, deflation...the last seller gets fucked. Great point, and the way things are going......not that far fetched. It is amazing how much the prices of some homes have dropped in the past 18 months. Many are upside down, big time on their mortgages.

blacksword404 -> RE: Understanding Deflation and our economy woe's finally! (12/22/2008 9:28:49 PM)
quote: ORIGINAL: ArticMaestro Blacksword, I didn't say that it was impossible to happen, just that if it did, the cash in your mattress, would be nothing but green paper. Hence keeping it in your mattress is a silly idea. Though I don't think British belongs on that list, when did thier cash cease to have any value? The idea that anyone who actually thinks everything is going to collapse, would waste time hoarding cash and chatting on line is kind of ridiculous. If you really think it is coming, you need bullets, beans, water filters, extra coats, Armagedon bunker, a functioning militia to defend it, ect... Not a mattress full of cash. Musicmystery, I didn't say anything about the difference between currency and money, did you have a new tangent to bring up? You missed my point. It's not about their cash but the fact that nothing last forever. I'm sure at those times people never thought the day would come. But come it did. Those were Empires and although we have the influence we are just a country.

ArticMaestro -> RE: Understanding Deflation and our economy woe's finally! (12/22/2008 10:27:04 PM)
I guess I did miss your point, Blacksword, Still don't see it. Why would you think I would think anything would last forever? But I still think that if one thinks it is all coming to an end in the near future, hoarding cash in the mattress (the specific thing I was adressing) would be a counterproductive waste of time. And in the event that society does not crumble in the near term (which would be required to have FDIC cease to exist), you place your wealth at risk. Just my opinion, anyone who wants can of course keep their money in thier mattress instead of a bank.

SimplyIsaac -> RE: Understanding Deflation and our economy woe's finally! (12/22/2008 11:07:53 PM)
quote: ORIGINAL: MzMia ---->step 1 Consumers stop spending because they think prices will fall further Yep, I'm guilty of that with getting a new 40" flatscreen. I keep going into the store, saying "meh, it'll come down in price more in another month." Then again, Samsung and LG were recently busted on price fixing, so i guess that means sometimes the prices are not what they should be...

blacksword404 -> RE: Understanding Deflation and our economy woe's finally! (12/23/2008 12:09:59 AM)
quote: ORIGINAL: ArticMaestro I guess I did miss your point, Blacksword, Still don't see it. Why would you think I would think anything would last forever? But I still think that if one thinks it is all coming to an end in the near future, hoarding cash in the mattress (the specific thing I was adressing) would be a counterproductive waste of time. And in the event that society does not crumble in the near term (which would be required to have FDIC cease to exist), you place your wealth at risk. Just my opinion, anyone who wants can of course keep their money in thier mattress instead of a bank. I will stick with gold and silver coins.

ArizonaSunSwitch -> RE: Understanding Deflation and our economy woe's finally! (12/23/2008 12:42:49 AM)
quote: ORIGINAL: MrRodgers quote: ORIGINAL: Hippiekinkster Good question. What throws a kink into the whole equation is that manufacturing comprises less than 10% of GDP now, as opposed to >30% during America's heyday. Well, maybe. I really don't know if that matters much. But we are seeing deflation in the housing market for certain. We're seeing deflation in the consumer goods sector of the economy. I dunno about food prices, as my buying habits are not typical. Interesting thread. As an example of how the whole capitalist culture has caught on...it is in our words, meaning and measurments. Gross Domestic PRODUCT would have you believe it is a measure of what we PRODUCE. IF 10% of of our total business is manufacturing, then 10% of our PRODUCE is manufacturing. The rest is a 'production' of nothing. Services and financial transactions do not PRODUCE anything and should never be counted as a part of GDP. But we can't let that happen. We count all of the paper-trading that capitalism is...as a 'produce' when it clearly is not. So what is important concerning the 'production' part of 'GDP' is that almost 20 years ago (1990 census) we finally had more people working for some level of govt. than in manufacturing. (19 million-govt....17 million manufacturing) There is a clue to the future there. Pay no attention to the numbers as they serve only the plutocrats and speculators. Yeah because all of those accountants, doctors, doormen, IT people, executives and prostitutes don't do real work eh ? We don't manufacture much any more because any manufacturing business in this country that makes money is paying greater than 40 percent taxes. If you open a factory in Ireland if i'm not mistaken you pay about 11% top. You pay potentially much less than that in china or other 3rd world nations. But hey, we can't let rich people pay the same percentage taxes as poor people that would be unfair. After all if we had a 15% flat income tax a poor person that makes one dollar would pay 15 cents, a business owner that makes an even million (still a very small business in terms of the number of people he employs) would only pay $150,000. God forbid if this person were to only pay a million times more in taxes instead of at least 3 million times more. The same people bitching about the rich not paying enough taxes are the same people bitching about not having a job or their job not paying them enough and many of these same people are so wilfully clueless about basic economics that they don't see the connection. Btw, the tax issue alone is good enough to drive manufacturing (and any other type of job that can be performed remotely) overseas. Throw in draconian environmental and osha regulations and anyone who wants to open a major manufacturing plant in this country is subjecting themselves to a potential shareholder lawsuit (and should have their head examined). If you think the rich don't pay their fair share or universally make their money illegally, YOU are the problem.

ArizonaSunSwitch -> RE: Understanding Deflation and our economy woe's finally! (12/23/2008 12:58:57 AM)
quote: ORIGINAL: samboct True enough- but banks have been known to charge fees which more than negate the amount of interest they pay on an account. Also- in the 30's the fear was that the banks would fail- not a problem if the money's in your mattress. Yes, today there is FDIC insurance, but we may be putting that to the test. In short, bank fees and access charges (ATM fees) already can cost you money in a "savings" account- and if things become deflationary, I'd expect those fees to increase further relative to the "interest" paid on the account. Sam 1). Money in your mattress doesn't particularly increase your safety when your money happens to be a fiat currency. 2). Banks will charge whatever interest rate that compels people to deposit money with them. How much they have on deposit is directly related to how much they are allowed to loan out. Their cut comes not only from the loan vs savings interest rate but from the fact they are allowed to loan out a multiple of the amount they have on reserve (savings deposit balances being part of that). Or in other words if they piss people off enough that they pull their money and go elsewhere (another bank or the mattress) they are screwed. There are certain government debt instruments that are now selling for well below 1 percent interest. I'm pretty sure any bank is safe as long as their savings account interest rate is above 0.0 at the moment.

ArizonaSunSwitch -> RE: Understanding Deflation and our economy woe's finally! (12/23/2008 1:20:38 AM)
quote: ORIGINAL: ArticMaestro Blacksword, I didn't say that it was impossible to happen, just that if it did, the cash in your mattress, would be nothing but green paper. Hence keeping it in your mattress is a silly idea. Though I don't think British belongs on that list, when did thier cash cease to have any value? The idea that anyone who actually thinks everything is going to collapse, would waste time hoarding cash and chatting on line is kind of ridiculous. If you really think it is coming, you need bullets, beans, water filters, extra coats, Armagedon bunker, a functioning militia to defend it, ect... Umm, by any chance have you seen any of the year over year sales figures for the gun and ammunition manufacturers lately ? Everything else on your list is a distant secondary need (including food) in that type of situation. The country's population during the first great depression was far more law abiding than we have now and the public schools didn't indoctrinate the class envy crap they do today. Plenty of people are preparing themselves for a potential depression where the economic damage is going to be the secondary disaster compared to the blood that will be flowing in the streets. A whole bunch of people are going to be begging for marital law.

Hippiekinkster -> RE: Understanding Deflation and our economy woe's finally! (12/23/2008 3:12:19 AM)
quote: ORIGINAL: ArizonaSunSwitch quote: ORIGINAL: ArticMaestro Blacksword, I didn't say that it was impossible to happen, just that if it did, the cash in your mattress, would be nothing but green paper. Hence keeping it in your mattress is a silly idea. Though I don't think British belongs on that list, when did thier cash cease to have any value? The idea that anyone who actually thinks everything is going to collapse, would waste time hoarding cash and chatting on line is kind of ridiculous. If you really think it is coming, you need bullets, beans, water filters, extra coats, Armagedon bunker, a functioning militia to defend it, ect... Umm, by any chance have you seen any of the year over year sales figures for the gun and ammunition manufacturers lately ? Everything else on your list is a distant secondary need (including food) in that type of situation. The country's population during the first great depression was far more law abiding than we have now and the public schools didn't indoctrinate the class envy crap they do today. Plenty of people are preparing themselves for a potential depression where the economic damage is going to be the secondary disaster compared to the blood that will be flowing in the streets. A whole bunch of people are going to be begging for marital law. No doubt they are buying the surplus from the Y2K end of the world. Hahahaha. [8D]

samboct -> RE: Understanding Deflation and our economy woe's finally! (12/23/2008 6:40:56 AM)
"Btw, the tax issue alone is good enough to drive manufacturing (and any other type of job that can be performed remotely) overseas. Throw in draconian environmental and osha regulations and anyone who wants to open a major manufacturing plant in this country is subjecting themselves to a potential shareholder lawsuit (and should have their head examined). If you think the rich don't pay their fair share or universally make their money illegally, YOU are the problem." I suspect a far more important reason than taxes as to why manufacturers don't want to operate in this country has to do with what we're seeing now- i.e. the financial system has been a giant Ponzi scheme which has promised inflated returns on investment (ROI) for years. When an investor was offered a choice of 12% ROI using "complex financial instruments, hedge funds, highly leveraged money, etc." compared to investing in a manufacturing business whose ROI is more typically 8-12% in a mature business, where do you think the investment funds went? This lead to a spiral of costs in manufacturing because getting money got more expensive since the "complex financial instruments" were supposedly safer. The riskier your investment, the more money it costs you to get a loan. China didn't have those "complex financial instruments" and hence, the cost of capital in China was cheaper than in the US. China has also been able to cut costs on manufacturing because they haven't bothered with little details like IP, regulatory compliance, quality assurance, pollution controls, fair wages, etc. But taxes being so much of an issue? Haven't heard that discussed as much of a problem, and I regularly attend meetings where people discuss things like new plant production. Nor do manufacturers in advanced materials bellyache about OSHA regulations although the inspections can get a little tedious because the inspectors want to find stuff that's wrong to justify their jobs. But those "draconian" regulations as you call them managed to keep lead paint out of toys, ethylene glycol out of pet food, and melamine out of milk- as well as numerous other contaminants in our medicines when they were enforced (not under the current administration) The people I talk to generally acknowledge that the regulations help consumers feel safe and this in turn helps grow an economy. Nobody is suggesting getting rid of them- they want their plants and their products to be safe. They do feel that they are disadvantaged with respect to China which doesn't enforce either consumer of workplace safety. In terms of suggesting that the rich don't pay their fair share of taxes- well, they don't, since the divide between the rich and the poor continues to grow. See Harry Truman comments posted earlier as to why this is a problem for a democracy. I'd also point out that the main reason for this financial meltdown can be ascribed simply to greed- the rich people wanted to get richer and have brought the house of cards that they built down upon all of us. Greenspan wanted to believe that people were no longer greedy and that regulations were unnecessary. It seems to me that anyone who espouses the viewpoint that the rich need a tax break at this point hasn't been paying much attention to current events or has failed to comprehend their causes. Sam

ArizonaSunSwitch -> RE: Understanding Deflation and our economy woe's finally! (12/23/2008 8:11:28 AM)
quote: ORIGINAL: samboct In terms of suggesting that the rich don't pay their fair share of taxes- well, they don't, since the divide between the rich and the poor continues to grow. See Harry Truman comments posted earlier as to why this is a problem for a democracy. I'd also point out that the main reason for this financial meltdown can be ascribed simply to greed- the rich people wanted to get richer and have brought the house of cards that they built down upon all of us. Greenspan wanted to believe that people were no longer greedy and that regulations were unnecessary. It seems to me that anyone who espouses the viewpoint that the rich need a tax break at this point hasn't been paying much attention to current events or has failed to comprehend their causes. Sam No Sam, what you imply is that the rich don't work any harder or smarter than the poor and therefore don't deserve greater returns. Under that system the most efficient way to make money is to sit on your ass collecting a welfare check, thankfully something the rich haven't considered worthwhile yet. And please, my comprehension is spot on, get over your indoctrination.

samboct -> RE: Understanding Deflation and our economy woe's finally! (12/23/2008 8:57:07 AM)
"No Sam, what you imply is that the rich don't work any harder or smarter than the poor and therefore don't deserve greater returns. Under that system the most efficient way to make money is to sit on your ass collecting a welfare check, thankfully something the rich haven't considered worthwhile yet." 1) I implied nothing of the sort. 2) I worked in a firm where in round numbers, my boss, the owner of the company made 20X more money than I did. He worked longer hours (but ineffectively), was reasonably intelligent but not smarter than me (with all due modesty) and I'm better educated, but where he was different than me dramatically was in greed- he was orders of magnitude greedier than me. He also had the good fortune to start a business when people expected to make money by running or investing in a business- not in "complex financial instruments"- it's a lot harder going these days. I know- I'm doing it. One of the questions I asked myself when I was working for him was why should he make 20x more money than me? Your comment implies that I should feel gratitude towards him for taking on the burden of working harder so that I'd have a job. Instead, I loathe the SOB- he lied to me and others about promising rewards that were never delivered. And in terms of importance to the company- I was the top selling analyst there. When I left, the business was sold in less than 2 years. However, I doubt I'll ever make more than a small fraction of the money he did. 3) This country used to be a meritocracy- that by dint of hard work, education, and a government that made sure that no one was denied access to the marketplace, an individual had no limits on their earning potential. However, a meritocracy must balance reward with work/risk/education/brains. When a meritocracy fails to do that-it fails at being a meritocracy. Effectively we're becoming an aristocracy- that the rich are now born into their money because there's so little social mobility. How do you explain the success of someone like Paris Hilton? What's the difference between her and Fergie? Why have we bailed out the banks? If that isn't providing protections for the rich that the rest of us unwashed don't have- I don't know what is- and that's an aristocracy. 4) Your assumption is that the rich in this country have somehow earned it by working harder. Well, they haven't- and they certainly haven't worked harder to account for the vast differences. There is no way that executives in this country work over 100-1000x harder or more effectively than the lowest paid people in the company. It's one of the reasons that our economy is collapsing- that the work/risk/reward benefits are so out of kilter with reality. Sam

ArticMaestro -> RE: Understanding Deflation and our economy woe's finally! (12/23/2008 11:41:40 AM)
"This country used to be a meritocracy- that by dint of hard work, education, and a government that made sure that no one was denied access to the marketplace, an individual had no limits on their earning potential." When did this situation occur? I seriously doubt a Woman, Black, Mexican or Native American would agree with you .

celticlord2112 -> RE: Understanding Deflation and our economy woe's finally! (12/23/2008 11:45:30 AM)
quote: ORIGINAL: ArticMaestro "This country used to be a meritocracy- that by dint of hard work, education, and a government that made sure that no one was denied access to the marketplace, an individual had no limits on their earning potential." When did this situation occur? I seriously doubt a Woman, Black, Mexican or Native American would agree with you . Nor, for that matter, would Cornelius Vanderbilt, who built his empire initially by illegally opposing a government sanctioned monopoly.

ScooterTrash -> RE: Understanding Deflation and our economy woe's finally! (12/23/2008 12:03:29 PM)
quote: ORIGINAL: samboct ....Your assumption is that the rich in this country have somehow earned it by working harder. Well, they haven't- and they certainly haven't worked harder to account for the vast differences. There is no way that executives in this country work over 100-1000x harder or more effectively than the lowest paid people in the company. It's one of the reasons that our economy is collapsing- that the work/risk/reward benefits are so out of kilter with reality. Sounds like sour grapes to me. Certainly there are examples of ridiculous compensation, but to lump all financially independent folks into one big basket is bullshit. Whether it be from hard work, luck, right place right time, good (& perhaps also lucky) investing and sound financial planning, lots of folks are in decent shape financially and should not be penalized for that.

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