Do you even have the stomach for reading about deflation?

June 28, 2010 | By | 1 Reply More

The International Business Manager of the U.K. Telegraph is sounding the alarm.

Entitled “Deflation: Making Sure It Doesn’t Happen Here“, it is a warfare manual for defeating economic slumps by use of extreme monetary stimulus once interest rates have dropped to zero, and implicitly once governments have spent themselves to near bankruptcy.

I’m no economist, but this sounds ominous. This article sent me off to read more about deflation.



Category: Economy

About the Author ()

Erich Vieth is an attorney focusing on consumer law litigation and appellate practice. He is also a working musician and a writer, having founded Dangerous Intersection in 2006. Erich lives in the Shaw Neighborhood of St. Louis, Missouri, where he lives half-time with his two extraordinary daughters.

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  1. Niklaus Pfirisg says:

    Deflation is a natural economic process. The problem is that most people don't understand this, and the economists who get the most attention are closely attached to the finiancial industries.

    The financial sector benefits from inflation while the consumers get poorer.

    In most cases, investments grow in dollar value during inflationary periods, while the value of those dollars (in purchasing power) declines. This means that the vast majority of people who have no significant investment income, must spend a larged percentage of their hard earned dollars on food, housing and clothing, and less on those niceties that drives out economy, such as dining out, that new IPhone, a new car and such.

    Eventually, the consumers can't afford to consume at the previous levels, and have to reduce expenses. This is happening now. They use prepaid phones instead of an expensive phone with an expensive service contract. opt for advertising sponsored OTA TV instead of expensive cable contracts. They drive the same car until it become un-maintainable, the replace it with a used car at a fraction of the cost of a new one.and they live from paycheck to paycheck not being able to hold much back for savings and in most cases have nothing left over to place in high-earning risky investments.

    Deflation will happen. it must happen because the costs of maintaining an inflatiionaly economy can't be maintained.

    In 1950, the average price of a new car was about $1500.00. In 2008 It's $28,715.

    In 1950 the average anual income was $3200. In 2008 average income was $41,335.

    So in 1950 an average priced new car cost about 47 percent of the average persons income, and in 2008 the average new car cost about 69 percent of the average income. Prices for food, housing and clothing yeild comparable results

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