Posted on 02/22/2015 10:09:49 AM PST by OwenKellogg
Conventional wisdom indicates slowing global economy and increased production are the root causes behind the precipitous drop in oil prices since mid-2014.
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Further signs of the impact of deflation, despite trillions of stimulus funds, include:
1.Negative interest rates on short-term securities and debt instruments.
2.The reduction of risk premiums in short and long-term debt financing for governments.
3.Increasing costs of healthcare for virtually every American, which adversely affects disposable income.
4.Declining real wages in the United States due to tax increases at the state and local levels.
5.Declines in labor force participation rates.
6.Lack of wage growth despite allegedly higher employment since 2008.
7.Substantially declining commodity prices.
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Until our government realizes that the culmination of accommodating fiscal and monetary policies for decades is leading to a deflationary spiral, we are doomed to even greater economic volatility than we have ever experienced in the past.
(Excerpt) Read more at americanthinker.com ...
From the Austrian school of economics:
Deflation is a contraction in the supply of money, and, as such, is the opposite of inflation. A decline in the price level is known as price deflation, but outside the Austrian School of Economics, this distinction is rarely made and the term deflation often refers to falling prices.
http://wiki.mises.org/wiki/Deflation
We certainly haven't seen a contraction in the supply of money, but we certainly have endured decades of mismanagement in the free economy, leading to the symptoms noted by the author.
The author:
Col. Frank Ryan, CPA, USMCR (Ret) served in Iraq and briefly in Afghanistan and specializes in corporate restructuring and lectures on ethics for the state CPA societies. He has served on numerous boards of publicly traded and non-profit organizations.
The author’s solution is spot on:
To reverse the effects of deflation, government spending and taxes must be reduced. Government must also improve the regulatory climate and avoid intervening in periods of economic stress because it only reinforces the concept that there are no negative consequences for bad economic decisions. Finally, to stop a deflationary spiral, our government must reduce uncertainty and provide stable, consistent policies that permit planning by job creators.
Healthcare cost increase is a result of imposed regulatory burden and is neither here nor there as far as deflation is concerned, other than being an even greater burden than it would be otherwise with most everything else falling in price. It could be argued that it’s an example of cost-push inflation instead.
Like everything else, all we can do is hope that our country survives until January 21, 2017. That is the real American Dream now, regardless of the topic.
No, it is a sign that OPEC (And 0bama) want to drive the small ‘upstart’ American oil drilling, pumping and transporting companies out of business.
And it is working.
The price will go back up to where it was, or higher by the end of the year. Maybe by mid-summer.
all we can do is hope that our country survives until January 21, 2017
Real Americans need hope and change if they want to keep their country. Fundamental transformation is not working out very well.
No, it is a sign that OPEC (And 0bama) want to drive the small ‘upstart’ American oil drilling, pumping and transporting companies out of business.
I tend to agree that the oil price issue may be economic war, either on US interests or on Russian/Iranian interests.
Why are mortgage rates stuck at around 3.5%+?
One big problem is that some things are deflating and others are inflating. The cost of real estate and many manufactured products (especially electronics) is deflationary. The cost of food, education and healthcare continue to inflate unabated.
Money owed and not repaid is lost.
Especially if spent on consumables and not on Capital Stock.
“To reverse the effects of deflation, government spending and taxes must be reduced.”
Wish I could be more positive, but I don’t see a future where what the author suggests is going to happen.
Unless we INDIVIDUALS start preparing for the inevitable collapse, we have only ourselves to blame if we’re left in dire straits when this House of Cards falls.
It’s going to be spectacular...and not in a GOOD way!
If fracking production hadn’t soared, I might think falling oil prices were due to de-leveraging.
We may deflate catastrophically with the new worldwide debt since 2007, but I think falling oil prices has much more to do with oil production due to fracking than it has to do with China’s impending collapse or some such.
Deflation is not done yet though, and if oil stays low enough, Texas and Oklahoma will have a new round of economic depression like the 1980s and that will be deflationary, at least for a while.
When pigs fly. There is no political will in D.C. to govern responsibly. It is all about very short term power and money. Very short term. All these guys will land on their feet so they don’t care if we crash, as long as they are all set for it.
I keep praying, almost literally, that I retire and die before the world wide debt powder keg blows up and we crash “for realz”. If the US government can put off the economic collapse another 15-20 years, I should be good to go.
No. No deflation. You can already here politicians tacking on higher taxes to make up declines in the price of energy. They will tax our way out of a deflationary spiral.
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