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Old November 20 2008, 07:21 PM   #1
propita
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Who here is worried about deflation?

I remember when I was a kid, seeing pictures of the Depression (apples for a nickel, etc) and asking my Dad why didn't people just buy the food. He said they literally didn't have any money. That that was called "deflation," where the prices keep dropping but no one's buying anything.

So does that mean that people who DO have continuing jobs, paying the same wages as this year, would come out of this fairly well?

Any economists out there who're willing to explain?
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Old November 20 2008, 07:23 PM   #2
Gagh
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Re: Who here is worried about deflation?

Sultry Susan sprung a leak last week, but luckily I'd got a puncture repair kit the week before. Thanks for asking, my friend.
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Old November 20 2008, 07:25 PM   #3
propita
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Re: Who here is worried about deflation?

Gagh wrote:
Sultry Susan sprung a leak last week, but luckily I'd got a puncture repair kit the week before. Thanks for asking, my friend.
That took me a second, then .
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Old November 20 2008, 07:27 PM   #4
John Picard
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Re: Who here is worried about deflation?

If I were you, I'd worry more about Stagflation.
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Old November 20 2008, 07:29 PM   #5
Mr Awe
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Re: Who here is worried about deflation?

It all comes down to supply and demand. If demand drops, the prices drop. Demand can drop for a variety of things from an item being last year's fashion to fewer people having spending money. No, I don't think deflation will be a big problem. But, yes, for those who have money, if the prices drop they can buy more.

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Old November 20 2008, 07:38 PM   #6
Mallory
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Re: Who here is worried about deflation?

I'm not worried about deflation. I'm more worried about the combination of inflation, high unemployment and soaring interest rates and/or tight credit.
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Old November 20 2008, 08:33 PM   #7
Meredith
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Re: Who here is worried about deflation?

No worries about deflation as long as my salary doesn't deflate too much.
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Old November 20 2008, 10:30 PM   #8
Captain Intrepid
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Re: Who here is worried about deflation?

propita wrote: View Post
So does that mean that people who DO have continuing jobs, paying the same wages as this year, would come out of this fairly well?
A lot of people did very very well for themselves during the Great Depression. Of course, a lot of people starved or froze to death or were shot by corporate agitators too.
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Old November 20 2008, 10:31 PM   #9
John Picard
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Re: Who here is worried about deflation?

Mallory wrote: View Post
I'm not worried about deflation. I'm more worried about the combination of inflation, high unemployment and soaring interest rates and/or tight credit.
Stagflation.
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Old November 20 2008, 10:48 PM   #10
Elmo Dukat
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Re: Who here is worried about deflation?

John_Picard wrote: View Post
Mallory wrote: View Post
I'm not worried about deflation. I'm more worried about the combination of inflation, high unemployment and soaring interest rates and/or tight credit.
Stagflation.
Me too. In fact, that's how policy has been trending lately, even though easy money and high taxes is a historically losing combination. But what do you do when you don't like the lessons of history? Well, write your own version of history, of course!
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Old November 20 2008, 11:16 PM   #11
Mallory
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Re: Who here is worried about deflation?

John_Picard wrote: View Post
Mallory wrote: View Post
I'm not worried about deflation. I'm more worried about the combination of inflation, high unemployment and soaring interest rates and/or tight credit.
Stagflation.
Sometimes a more simple explanation works best JP.
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Old November 20 2008, 11:24 PM   #12
John Picard
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Re: Who here is worried about deflation?

Mallory wrote: View Post
John_Picard wrote: View Post
Mallory wrote: View Post
I'm not worried about deflation. I'm more worried about the combination of inflation, high unemployment and soaring interest rates and/or tight credit.
Stagflation.
Sometimes a more simple explanation works best JP.
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Old November 20 2008, 11:31 PM   #13
George Steinbrenner
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Re: Who here is worried about deflation?

I'm not worried about deflation or even stagflation. I just prefer flation.
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Old November 21 2008, 12:01 AM   #14
Holdfast
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Re: Who here is worried about deflation?

propita wrote: View Post
So does that mean that people who DO have continuing jobs, paying the same wages as this year, would come out of this fairly well?
No. Because they wouldn't have their job for long.

Deflation occurs because people are scared to spend money.

No spending = price cuts = job cuts = wage suppression = deflation = your money buys more tomorrow than today.

Follow the cycle through to the logical conclusion. No-one dares spend anything because a) you can buy more tomorrow with the same money and b) they think they're going to lose their job tomorrow.

Your economy hits the wall. Dies. Is buried six feet under. And then starts digging.

Inflation is scary too of course, but deflation is sheer terror.

As JP and others point out though, stagflation is extreme bowel-loosening trauma...

The real problem that central banks are going to face is that they're running out of room to maneouvre on monetary policy. Close to zero interest rates beckon, which DOES create a risk of deflation... and just ask Japan how THAT works out....
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Old November 21 2008, 01:02 AM   #15
propita
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Re: Who here is worried about deflation?

Holdfast wrote:
propita wrote:
So does that mean that people who DO have continuing jobs, paying the same wages as this year, would come out of this fairly well?
No. Because they wouldn't have their job for long.

Deflation occurs because people are scared to spend money.

No spending = price cuts = job cuts = wage suppression = deflation = your money buys more tomorrow than today.

Well, I figure there are some jobs that remain okay. Hubby's a pharmacist. One way or another, people need their meds--or they get sick and/or die. Pharmacists are in short supply (I've read there are more attorneys in CA than there are pharmacists in the entire US).

So I was hoping that if things do head to 1930s Depression deflation, that Hubby and I will still be...well, not great, but okay.
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