Paul Krugman suspects that the economy is on the verge of entering into deflation.
If he is right, that is a very bad place to be. Our economy does not work if people are not willing to spend money. Simply put, people go out and buy goods. The more that people buy, the more demand there is. More demand, more goods are made, which means more jobs are created up and down the supply chain. If there is inflation, the subtle pressure is to spend now, as saved cash will not buy later what it will today.
In a deflationary economy, the pressure is to save, not spend, as saved cash will buy more later. People buy less, jobs are lost. Stores and factories close, nobody leases the spaces, landlords go bust, property values fall and if you think that a U-3 unemployment rate of 10% is bad, you ain't seen nothing yet.
But you will, if the party of Hoover has anything to say about it.
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Saturday, February 20, 2010
7 comments:
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It seems like to me that the democrats and Obama are willing accomplices in this as well.
ReplyDeleteI'd suspect more likely "unwilling accomplices". Democrats, in general, don't want to destroy the middle class. But that is clearly the aim of the GOP.
ReplyDeleteI'm doing my best to stimulate the economy, but my paycheck hasn't kept up with reality...
ReplyDeleteIn the area of economics, there doesn't seem to be much difference between Republican policy and Obama Administration policy. Bail out the banks, make the rest of us pay for it. That's been the policy since late 2008.
ReplyDeleteMy guess is that Krugman's right. There's certainly no interest on the government's part in stopping this.
EB
ReplyDeleteThe rethugs crap must be working because I'm no longer a member of the middle class, hell I'm almost a member of the very bottom class.
So let's raise a glass of, I'm going to use water because I can't afford alcohol, and praise lord ronnie for all his wonderfulness and unfailing leadership.
I'm still trying to figure out what exactly the rethugs think they are going to get out of completely bankrupting the country both economically, politically and yes morally. Do they even have a game plan for the end of this? Or do they think they are actually making things better? Or are they just full of crap? OK that last one is a gimme.
Their plan, Ruckus, is the same as their plan has always been. Since they were the ones with money to begin with, they simply bankrupt everybody in the country, then buy up the actual physical assets -- the land and buildings and machines and so forth -- for pennies on the dollar. Deflation is a way to transfer wealth from the debtor class -- who are no longer able to repay their debts in deflated dollars (i.e., monetary deflation is debt inflation) -- to the creditor class -- i.e., our Republican overlords.
ReplyDeleteFor example, see 1930's Sheriff's sales of foreclosed farms. Often a 1,000 acre farm would be sold for $20 to the only person who showed up with cash folding money -- generally one of the state's high and mighty, aiming to add more to his empire. In some places the people had enough and gathered at these auctions to make sure that anybody who dared make an insulting bid of that sort would be beat up and terrorized rather than allowed to buy properties for pennies on the dollar, but this was not common, because usually the Sheriff worked for the oligarchs, and protected the oligarchs.
That's the whole goal: the oligarchs own everything and the rest of us... serfs. Slaves. Living only where our oligarchs allow us to live, doing whatever job our oligarchs tell us to do, for whatever pay (or not) that our oligarchs feel like offering. We've been moving that way for a long time, but our 1930's experience temporarily moved us away from the brink. But the 1930's experience has been forgotten by today's Americans, who seem all too keen to go sell themselves into serfdom...
- Badtux the Economics Penguin
Badtux, I wish you were wrong about this. But I don't think that you are.
ReplyDelete