World edges closer to deflationary slump as money contracts in China

The Telegraph ^ | 5/13/2012 | Ambrose Evans-Pritchard

[muawiyah]

We owe the Chinese lots and lots of money. Just Friday it was announced that the Green River oil shale had about as much recoverable reserves as the entire rest of the world. http://www.freerepublic.com/focus/news/2882771/posts?page=41

[muawiyah]

Deflation will happen as a direct consequence of lower costs of production, delivery, and sale brought about by mechanization, automation, robotics, computerization and improved methods (smart guys thinking about it).

The United States currently has 20 million people unemployed as a consequence of these processes. We'll probably end up with another 20 million unemployed from the same processes in just a decade.

We have to figure out how to keep folks employed and paid.

[rbg81]

The biggest item in most people’s budgets is a place to live. While homes could deflate still further, rental costs will likely inflate.

[Lazamataz]

The United States currently has 20 million people unemployed as a consequence of these processes. We'll probably end up with another 20 million unemployed from the same processes in just a decade. We have to figure out how to keep folks employed and paid.

How about the Post Office?

;^)

[muawiyah]

India has several hundred ancient temples where it is known that gold was set aside. They popped one of them open several months ago. First reports were that it had billions in gold. Then they said $45 billion in gold. More recently stories have circulated that it was $145 billion, and they were still digging through the network of underground rooms finding more.

Now what do you imagine news like that does to the price of gold?

[muawiyah]

We mechanized, automated and computerized the bejaysus out of postal operations. They only need about 300,000 people these days and are looking to layoff 250,000 in short order.

If you wanted to do a study on DEFLATIONARY PRESSURES AND THEIR CONSEQUENCES you could start at USPS.

Since the early 1970s they had a 700% increase in productivity per workhour. I was one of the first of the budding young employees at Headquarters to come up with a device that would displace one employee for every one device purchased. That became a goal or ambition of others as well, and they worked it to the bone.

[muawiyah]

You can buy a house in the DC suburbs for $250,000 to $350,000 ~ and rent it out for $2000 to $2700 per month.

That would enable you to pay off the mortgage before you'd exhausted the depreciation.

[Roccus]

I’ve heard convincing arguments that the core of the problem lies with the repeal of the Glass–Steagall Act around 1999. Only 8 years later, we had our inevitable crisis.

BINGO!!

The dynamite (CRF) was already in place, but Gramm-Leach-Bliley (1999) put the match to the fuse.

[muawiyah]

China has a substitute for debt that works just as well to stagnate things ~ it's called 'a spare billion people'. Even as the number two economic powerhouse in the world, everybody there is still, on average, hopelessly impoverished.

Those spare billion would not, even with a doubling or tripling of income, be able to capitalize on their newfound wealth. Rather, fewer would starve, or die young, or be slaughtered as babies.

More hootches would be built, but they'd be the same mud-walled tarpaper augmented roof designs everybody else has. Pig breeding would not be done in a more elegant fashion ~ that being limited to the amount of food available, and no more fields would be put to the plough than they are now able to work.

The ducks would quack, the noodles would slurp, green onions would pop up in protected window boxes ~ and China ~ the real China ~ would slumber on into the immedate post neolithic future!

[Lazamataz]

Couldn't we just hire them into the Post Office to stand there, idle, and look disinterested?

I mean, it's worked for so many decades....

;^)

[muawiyah]

We got rid of that stuff years ago. Nobody just stands around looking disinterested. They were incorporated into the operation of the Great Machine at the heart of the planet (or which will be eventually).

[tom paine 2]

And those savings were used to back the construction of those “ghost apartments” pictured above

[reformedliberal]

I knew something was up when gold dealers on TV started advertizing selling at dealer cost with little or no commission. That told me that the smart money was selling their hoard or at least a lot of it.

---

I don’t know if it is still going on, or even what the details were (minimum purchases?)but I saw some ads a few months ago where dealers were offering $250 cash or so to first time gold buyers.

I am also unsure if MSM covered Soros and Buffet predicting a *gold bubble*, but when I mentioned it to a friend who is heavily invested in physical and miners, she was scathing that the fundamentals didn’t support the term *bubble*. That’s true, but all I could think of was that in a manipulated market, none of the old methods still operate. She eventually agreed.

I mentioned those two predictions to an extreme liberal and she turned absolutely bloodless. I thought at the time that it was interesting that even die-hard supporters of zerO and Co. were hedged with gold.

And yet: still another friend works for an international manufacturer with a lot of infrastructure in China. They are actually all over the world and our friend spends half his time in a plane going to Saudi, Japan, China and a couple of places here in the USA. His employer is doing alright to the point where the employee is putting off retirement as long as possible.

There just may be a lot of denial out there or people are expecting enough government intervention to change the predicted outcome. Or the predictions are overwrought to begin with. I just don’t have enough real information to judge, however, I expect bi-flation and would not be surprised to see price controls at some point.

The worst of all worlds, in other words.

[rbg81]

I sold my NoVA house in 2006 when the market was at its peak. Prices have about halved since then. According to my old neighbor, the guy who bought my house would like a word (or more) with me. But, hey, no one put a gun to his head. That’s what homes were selling for at the time.

[gunsequalfreedom]

And those savings were used to back the construction of those “ghost apartments” pictured above.

All the stuff we bought at Walmart provided a bunch of the money too. My guess is the biggest threat to the ordinary Chinese citizen's savings will be inflation, not those buildings but I could be wrong.

[tom paine 2]

The banks that loaned out the money will collapse taking the investors with them.