Mac Mcleod
United States
houston
Texas
flag msg tools
Avatar
mbmbmbmbmb
http://stefancheplick.tumblr.com/post/112839183468/the-remar...



Deflation is generally viewed as very bad. Looks like it is becoming a lot more common. It may also indicate we are really already in a recession globally and just don't realize it yet.

OTH, as the articles speculates, it could also be:
Quote:
1. Technology
2. Economic super cycles
3. Central Bank policies
4. Wealth inequality


Looking at the graph, you can see why governments panicked in 2008. We were well on our way to a great depression and a collapse of the financial system. That raises the risk of a world war a lot.
1 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Jon M
United Kingdom
Hitchin
Herts
flag msg tools
Avatar
Current deflation is due to rebalancing of oil (and other commodity) prices due to reduction in forecast demand in China. This will wash out in a year or two.
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Ed Bradley
United Kingdom
Haverhill
Suffolk
flag msg tools
badge
The best things in life aren't things.
Avatar
mbmbmbmbmb
Jon_1066 wrote:
Current deflation is due to rebalancing of oil (and other commodity) prices due to reduction in forecast demand in China. This will wash out in a year or two.


There's also a large debt-deflation component. The entire west has entered the same rut that Japan has been in for 2 decades.
1 
 Thumb up
0.05
 tip
 Hide
  • [+] Dice rolls
Jorge Montero
United States
St Louis
Missouri
flag msg tools
badge
I'll take Manhattan in a garbage bag. With Latin written on it that says "It's hard to give a shit these days"
Avatar
mbmbmbmbmb
The best part of the article is the comments, where we see how a lot of people talking about inflation can't even define what it is.
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Mac Mcleod
United States
houston
Texas
flag msg tools
Avatar
mbmbmbmbmb
http://www.washingtonpost.com/news/wonkblog/wp/2015/09/22/me...


Quote:
The problem now is that women's labor force participation has actually been declining since the Great Recession hit, and their wages have plateaued over that time as well. That's left households without any more escape valves to deal with the fact that men's earnings haven't gone up, in inflation-adjusted terms, for 40 years. It's no surprise, then, that middle class households are worse off now than they were 16 years ago.


Wasn't aware female workforce participation was also dropping.
1 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Walt
United States
Orange County
California
flag msg tools
Before terraforming Mars, Surviving Mars is required: Paradox Interactive; Steam.
badge
Please contact me about board gaming in Orange County.
Avatar
mbmbmbmbmb
Devil's advocate:

It doesn't matter. We don't actually track the economy that well in terms of de/inflation, PPP, CPI etc.

We don't need $150 cable, we use a $40 internet connection and $10 for a streaming service: $1200/year raise. We don't need a $3000 computer every few years, a $500 computer will last twice as long: $500-1000 raise. We don't need a land line for $30/month, we can get a Tracphone for $10/month: $240/yr.

A standard size TV used to be 19"; a big one was 25". They were $300-700. You can't easily find a 19" any more. A 25" is under $200 and flat. Clothes, though they come from half the world away, are as cheap as a decade ago. Energy costs are down, and solar is cutting in price just like electronics have. E-everything is cheaper than the manufactured and distributed physical equivalents.

The only things going up are housing and cell phone usage. How come houses are being bid up and every kid has a cell phone? They have more money left over. The money has to come from somewhere, so the logical conclusion is that the de/inflation numbers are wrong, or at least misinterpreted.

The industrial revolution paradigm was that every person and company had to grow to keep the economy growing. You needed that extra money coming in. But money from deflationary savings is just as green. We're now getting seriously post-industrial.

The economy is good and female labor numbers are at late 1980s levels. They're nearly double what they were in 1950. So, maybe more women are traditional homemaker roles. https://research.stlouisfed.org/fred2/graph/?g=1OIj
2 
 Thumb up
0.05
 tip
 Hide
  • [+] Dice rolls
Vapix
msg tools
mbmbmb
Inflation and deflation are symptoms of poor money management.

Not "micawber-style" money management, but the kind that's a government responsibility: how much money should there be in total and what should a unit of it be worth?

Both very difficult questions. Nobody is sure if there are good answers to either one, though there are plenty of theories.

There's actually no reason that price deflation for manufactured goods should be a problem. It's always there as a side effect of improving technology anyway. It certainly doesn't have to be accompanied by negative returns on investment, though it doesn't exclude that possibility.

So ... it would be quite nice of the price of consumer goods fell gradually (or you got better quality for the same price); you could also save for the future with realistic returns and modest risks; and this wasn't accompanied by ridiculous asset-price bubbles (especially in land and dwellings).

It will be interesting to look back on the period 2004-2020 and see if the world was able to finally figure out how money works.

 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Mac Mcleod
United States
houston
Texas
flag msg tools
Avatar
mbmbmbmbmb
Vapix wrote:
Inflation and deflation are symptoms of poor money management.

Not "micawber-style" money management, but the kind that's a government responsibility: how much money should there be in total and what should a unit of it be worth?

Both very difficult questions. Nobody is sure if there are good answers to either one, though there are plenty of theories.

There's actually no reason that price deflation for manufactured goods should be a problem. It's always there as a side effect of improving technology anyway. It certainly doesn't have to be accompanied by negative returns on investment, though it doesn't exclude that possibility.

So ... it would be quite nice of the price of consumer goods fell gradually (or you got better quality for the same price); you could also save for the future with realistic returns and modest risks; and this wasn't accompanied by ridiculous asset-price bubbles (especially in land and dwellings).

It will be interesting to look back on the period 2004-2020 and see if the world was able to finally figure out how money works.



I always had the impression that government is very afraid of deflation because it kills demand. Since you know the price will be lower in 6 months, you put off your purchase much longer than you would otherwise.
2 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Mac Mcleod
United States
houston
Texas
flag msg tools
Avatar
mbmbmbmbmb
Tall_Walt wrote:
Devil's advocate:

It doesn't matter. We don't actually track the economy that well in terms of de/inflation, PPP, CPI etc.

We don't need $150 cable, we use a $40 internet connection and $10 for a streaming service: $1200/year raise. We don't need a $3000 computer every few years, a $500 computer will last twice as long: $500-1000 raise. We don't need a land line for $30/month, we can get a Tracphone for $10/month: $240/yr.

A standard size TV used to be 19"; a big one was 25". They were $300-700. You can't easily find a 19" any more. A 25" is under $200 and flat. Clothes, though they come from half the world away, are as cheap as a decade ago. Energy costs are down, and solar is cutting in price just like electronics have. E-everything is cheaper than the manufactured and distributed physical equivalents.

The only things going up are housing and cell phone usage. How come houses are being bid up and every kid has a cell phone? They have more money left over. The money has to come from somewhere, so the logical conclusion is that the de/inflation numbers are wrong, or at least misinterpreted.

The industrial revolution paradigm was that every person and company had to grow to keep the economy growing. You needed that extra money coming in. But money from deflationary savings is just as green. We're now getting seriously post-industrial.

The economy is good and female labor numbers are at late 1980s levels. They're nearly double what they were in 1950. So, maybe more women are traditional homemaker roles. https://research.stlouisfed.org/fred2/graph/?g=1OIj


Different groups of people. Worker engagement of 15 to 54 year olds is at a 40 year low. We just don't count them as unemployed because they are not looking.

During the last crunch a lot of housing was bought by overseas investors. And we literally bulldozed thousands of houses to protect the market.

Energy costs are down. Food costs are up. Food quality is down. The default ham at kroger is now 37% water according to the label. Chicken is 29% water now. How do they even manage to cram in that much water?

Food of high quality is WAY up. 3x to 4x the price.

My personal experience among the young is more house husbands too.

One concern I have about the graph is that we are much earlier in the cycle this time and numbers have already reached 2008 levels. We have another 12 to 15 months to go and the fed's quiver is empty. The financial system is stronger and better funded than last time so the risk of a melt down is lower. But I don't know what it means that the deflationary level is so high and we are barely starting the recessionary period.

I agree it's possible the numbers are manipulated and we are mismeasuring them but with no way to prove that it's speculation. You should question the premises of your decisions but if you can't show that the premises are invalid, then you have to use them or you become incapable of making any rational decision. So got any way to show the deflationary premises are incorrect?

Personally, I see a lot of deflationary forces in the market. I'm not sure we'll have "good" inflation (from demand) any time soon and the fed might just start printing money so we get "bad" werner germany inflation.
1 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Vapix
msg tools
mbmbmb
maxo-texas wrote:
I always had the impression that government is very afraid of deflation because it kills demand. Since you know the price will be lower in 6 months, you put off your purchase much longer than you would otherwise.

This is certainly an issue, but IMO the effect on debt, saving, and investment is worse.

Deflation makes it more expensive to pay back debts, less attractive to save, and distorts decision-making for investments in capital goods, R&D, etc.

I don't think a serious "deflationary spiral" due to a reduction in demand would happen these days. If you look at consumer demand, people can wait, but they tend not to wait long. IMO the reduction in wealth from the indirect increase in the interest rate on housing would be more likely to reduce consumer demand than patience would
(BTW: this is just an opinion - I can't prove it, and I'm not quoting a serious article).
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Walt
United States
Orange County
California
flag msg tools
Before terraforming Mars, Surviving Mars is required: Paradox Interactive; Steam.
badge
Please contact me about board gaming in Orange County.
Avatar
mbmbmbmbmb
maxo-texas wrote:
I always had the impression that government is very afraid of deflation because it kills demand. Since you know the price will be lower in 6 months, you put off your purchase much longer than you would otherwise.

We've had deflation in electronics for fifty years or so. To be sure, strong deflation over the whole economy could be such a problem and the oil industry has been disrupted, but the mild, selective deflation, I think few people notice.
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Walt
United States
Orange County
California
flag msg tools
Before terraforming Mars, Surviving Mars is required: Paradox Interactive; Steam.
badge
Please contact me about board gaming in Orange County.
Avatar
mbmbmbmbmb
maxo-texas wrote:
Different groups of people. Worker engagement of 15 to 54 year olds is at a 40 year low. We just don't count them as unemployed because they are not looking.

Structural unemployment is a problem, and we're doing nothing significant about it. I don't even see the GOP addressing the problem.

maxo-texas wrote:
During the last crunch a lot of housing was bought by overseas investors. And we literally bulldozed thousands of houses to protect the market.

I'm pretty sure the bulldozing wasn't to protect the market: it was to prevent looting and squatting, and so they could tear up and sell or just stop maintaining the infrastructure in the area--a city cost-saving measure. I think this mainly happened in the rust belt.

maxo-texas wrote:
Energy costs are down. Food costs are up. Food quality is down. The default ham at kroger is now 37% water according to the label. Chicken is 29% water now. How do they even manage to cram in that much water?

Food of high quality is WAY up. 3x to 4x the price.

I am seeing maybe 25% increase in some food products, but I had attributed it to the CA drought, which I hope will be gone after this Winter. You should try TJ's if you haven't: high quality and low prices. If you can buy in their sizes without the food going bad, Costco can be worthwhile--but it's a time-consuming mess shopping there.

maxo-texas wrote:
My personal experience among the young is more house husbands too.

I'm not sure whether that's the job market, a logical who-makes-more decision, or removal of prejudice about who should be the homemaker/resident-parent. If it's a switch from needing two incomes and abandoning the kids, to one parent working and one caring for the kids, it may be a good thing, especially for young children. Whether it's a housewife or a househusband, I don't think I care.

maxo-texas wrote:
One concern I have about the graph is that we are much earlier in the cycle this time and numbers have already reached 2008 levels. We have another 12 to 15 months to go and the fed's quiver is empty. The financial system is stronger and better funded than last time so the risk of a melt down is lower. But I don't know what it means that the deflationary level is so high and we are barely starting the recessionary period.

I'll stand by deflation doesn't really matter (unless it hits houses or gets extreme).

maxo-texas wrote:
I agree it's possible the numbers are manipulated and we are mismeasuring them but with no way to prove that it's speculation. You should question the premises of your decisions but if you can't show that the premises are invalid, then you have to use them or you become incapable of making any rational decision. So got any way to show the deflationary premises are incorrect?

What I have--and I haven't looked into it deeply--is the money available to bid up home prices (+20% for me?) and buy trend items like the next smart phone. I don't think that money would be there if classic deflation were happening. Another example is I think car sales are still going up, outside of VW--but that mess is probably a net plus for the US.

Where I see deflation is overseas: China, EU, Oz because of China. To some extent that's a bad thing; to some extent we're recovering our own markets and our competitors are weaker.

But I also see some good deflation overseas. Prii are the best selling car in California, and it's easy to see why: even the top of the line Prius V is $25K-$35K. Toyota is gaining a lot of efficiency, and battery prices are falling (another good deflation, I think). Domestically, Ford's bet on the new F-150 trucks seems to be paying off, and taking the Mustang international is giving a lot of places a cheaper alternative to the German and Italian sports cars (not that Mustang is a sports car, exactly).

maxo-texas wrote:
Personally, I see a lot of deflationary forces in the market. I'm not sure we'll have "good" inflation (from demand) any time soon and the fed might just start printing money so we get "bad" werner germany inflation.

I would like to hear what you see as deflationary.

I really don't see the need to print money. So far, treasury bonds are selling fine, despite the ridiculously low interest rate, because the Chinese yuan, the EU Euro, and several other currencies are deflating. The USD is still safe, still the reserve currency. A lot of Chinese investors are moving assets and investments to the US; this may be less apparent outside CA.

I think we have other options if we needed to print money. We could, for example, sell foreclosed land in distressed states to foreign investors. We could reform our totally dysfunctional military procurement. We can generate jobs at will by installing solar to replace imported oil. The current Congress is just too engaged in pissing matches and grandstanding to do anything useful.
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Mac Mcleod
United States
houston
Texas
flag msg tools
Avatar
mbmbmbmbmb
Tall_Walt wrote:
maxo-texas wrote:
Different groups of people. Worker engagement of 15 to 54 year olds is at a 40 year low. We just don't count them as unemployed because they are not looking.

Structural unemployment is a problem, and we're doing nothing significant about it. I don't even see the GOP addressing the problem.

maxo-texas wrote:
During the last crunch a lot of housing was bought by overseas investors. And we literally bulldozed thousands of houses to protect the market.

I'm pretty sure the bulldozing wasn't to protect the market: it was to prevent looting and squatting, and so they could tear up and sell or just stop maintaining the infrastructure in the area--a city cost-saving measure. I think this mainly happened in the rust belt.

maxo-texas wrote:
Energy costs are down. Food costs are up. Food quality is down. The default ham at kroger is now 37% water according to the label. Chicken is 29% water now. How do they even manage to cram in that much water?

Food of high quality is WAY up. 3x to 4x the price.

I am seeing maybe 25% increase in some food products, but I had attributed it to the CA drought, which I hope will be gone after this Winter. You should try TJ's if you haven't: high quality and low prices. If you can buy in their sizes without the food going bad, Costco can be worthwhile--but it's a time-consuming mess shopping there.

maxo-texas wrote:
My personal experience among the young is more house husbands too.

I'm not sure whether that's the job market, a logical who-makes-more decision, or removal of prejudice about who should be the homemaker/resident-parent. If it's a switch from needing two incomes and abandoning the kids, to one parent working and one caring for the kids, it may be a good thing, especially for young children. Whether it's a housewife or a househusband, I don't think I care.

maxo-texas wrote:
One concern I have about the graph is that we are much earlier in the cycle this time and numbers have already reached 2008 levels. We have another 12 to 15 months to go and the fed's quiver is empty. The financial system is stronger and better funded than last time so the risk of a melt down is lower. But I don't know what it means that the deflationary level is so high and we are barely starting the recessionary period.

I'll stand by deflation doesn't really matter (unless it hits houses or gets extreme).

maxo-texas wrote:
I agree it's possible the numbers are manipulated and we are mismeasuring them but with no way to prove that it's speculation. You should question the premises of your decisions but if you can't show that the premises are invalid, then you have to use them or you become incapable of making any rational decision. So got any way to show the deflationary premises are incorrect?

What I have--and I haven't looked into it deeply--is the money available to bid up home prices (+20% for me?) and buy trend items like the next smart phone. I don't think that money would be there if classic deflation were happening. Another example is I think car sales are still going up, outside of VW--but that mess is probably a net plus for the US.

Where I see deflation is overseas: China, EU, Oz because of China. To some extent that's a bad thing; to some extent we're recovering our own markets and our competitors are weaker.

But I also see some good deflation overseas. Prii are the best selling car in California, and it's easy to see why: even the top of the line Prius V is $25K-$35K. Toyota is gaining a lot of efficiency, and battery prices are falling (another good deflation, I think). Domestically, Ford's bet on the new F-150 trucks seems to be paying off, and taking the Mustang international is giving a lot of places a cheaper alternative to the German and Italian sports cars (not that Mustang is a sports car, exactly).

maxo-texas wrote:
Personally, I see a lot of deflationary forces in the market. I'm not sure we'll have "good" inflation (from demand) any time soon and the fed might just start printing money so we get "bad" werner germany inflation.

I would like to hear what you see as deflationary.

I really don't see the need to print money. So far, treasury bonds are selling fine, despite the ridiculously low interest rate, because the Chinese yuan, the EU Euro, and several other currencies are deflating. The USD is still safe, still the reserve currency. A lot of Chinese investors are moving assets and investments to the US; this may be less apparent outside CA.

I think we have other options if we needed to print money. We could, for example, sell foreclosed land in distressed states to foreign investors. We could reform our totally dysfunctional military procurement. We can generate jobs at will by installing solar to replace imported oil. The current Congress is just too engaged in pissing matches and grandstanding to do anything useful.

Interesting points. I disagree on one particular point...

Money isn't available to bid up houses*. The same amount of money per month is available. With interest rates so low, the same amount of money per month buys a lot more house. When interest rates rise, housing is going to hit the wall.

*The evidence above shows that less total money is available to the bottom 80%. Wages have been stagnant. Purchasing power has dropped adjusting for inflation.
1 
 Thumb up
0.25
 tip
 Hide
  • [+] Dice rolls
Walt
United States
Orange County
California
flag msg tools
Before terraforming Mars, Surviving Mars is required: Paradox Interactive; Steam.
badge
Please contact me about board gaming in Orange County.
Avatar
mbmbmbmbmb
maxo-texas wrote:
Interesting points. I disagree on one particular point...

Money isn't available to bid up houses*. The same amount of money per month is available. With interest rates so low, the same amount of money per month buys a lot more house. When interest rates rise, housing is going to hit the wall.

*The evidence above shows that less total money is available to the bottom 80%. Wages have been stagnant. Purchasing power has dropped adjusting for inflation.

A point. Counter-point: With no hard limits on down payments or payments as a percent of income, cash flow freed by deflation is available to inflate home prices. Also, home interest rates have been pretty stable since 2010 and gently rising over the last few years: http://www.freddiemac.com/pmms/pmms30.htm
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Front Page | Welcome | Contact | Privacy Policy | Terms of Service | Advertise | Support BGG | Feeds RSS
Geekdo, BoardGameGeek, the Geekdo logo, and the BoardGameGeek logo are trademarks of BoardGameGeek, LLC.