Posted on 07/17/2021 6:31:01 AM PDT by millenial4freedom
Ok, the consensus around here is that monetary policies are driving through-the-roof inflation across all sectors and that this level of inflation will not be 'transitory' in spite of what members of the ruling class are saying.
I'm curious to here the rationale and reasoning from the deflationists here on FR. Why do you think we could be headed for deflation?
M4F
I’m more persuaded by your argument. We’ve been printing money for years now, producing almost no inflation. I’ve been wondering why not? I think the answer is: underlying deflationary forces are strong.
Supply disruptions are very real right now, mainly do to breakdowns in trucking, rail, and ocean shipping services. I can confirm that.
There has been significant USA inflation over the last year, but the 10 Year is declining?
To add perspective, 1.3% is less than 80 basis points from the all time historical low of 0.54%, which the 10 Year hit in July 2020.
Many of the major sovereign bonds are near zero or even negative return.
Japan is 0.02%.
Germany is negative -0.35% - basically, that means that the trading price of the bond has gone up after the initial sale, so if you buy it, you will actually lose 0.35% on your investment.
Anyone who traded during the Great Inflation of the 1970s and early 1980s - like me - has NO idea why interest rates are not going up.
Take all of the economists and line them up.
They will never reach a conclusion.
In 2019 - before COVID - the fertility rate for all USA women actually dropped below the replacement rate for the first time since the Great Depression.
The only reason the USA population grew in 2019 (and probably 2020) was because of immigration.
Native born USA women have been below replacement rate for many years.
In 2019 - which had a very strong economy - foreign born USA women were below the replacement rate for the first time since records have been kept.
The underlying economic trend in our country is deflationary.
The inflationary forces are only the result of currency manipulation, not real economic forces related to supply and demand.
Let's look at a single example of a durable good produced in the U.S. -- like Whirlpool washing machines.
The U.S. market for these things is finite, and we're probably living at a time when there's a "user penetration rate" for this durable product that exceeds 100%. What I mean by this is that there may be more functioning washing machines in the U.S. today than there are households. The number of households that DON'T have a washing machine is probably more than offset by the number of household washing machines in places like second homes, hotels, etc.
In a scenario like this, the inflationary pressure in the price of washing machines is almost non-existent. Whirlpool is limited to two areas of growth: (1) selling replacement appliances to existing customers, and (2) selling new ones to first-time purchasers who were probably washing their clothes by hand in the Amazon or the Ganges Rivers up until last month.
The problem with selling to Third World customers is that Whirlpool can't sell competitively to them if the products are made here in the U.S.
So the only real recourse for a major industrial producer like Whirlpool here in the U.S. is to use the force of government to compel people to buy new washing machines they really don't need -- perhaps by outlawing the old ones for their "energy inefficiency," or by mandating new ones that have "low water use" technology in them.
“ These so called financial experts, analysts and economists have no clue what they’re doing. It’s all flying by the seat of their pants.”
It’s awfully hard to accurately predict the behavior of the population and the economic activity that will occur as a result. That doesn’t mean it isn’t worth a try. But due to differing schools of thought and political agendas not only do different economists disagree about what is going to happen, they can’t even agree on what HAS ALREADY HAPPENED and why it did.
If you want a firehose of information done in an entertaining way check this out:
There is a “round two” available that is almost as good.
“ So the only real recourse for a major industrial producer like Whirlpool here in the U.S. is to use the force of government to compel people to buy new washing machines they really don’t need — perhaps by outlawing the old ones for their “energy inefficiency,” or by mandating new ones that have “low water use” technology in them. “
Or sell them washing machines when the one they own is no longer worth repairing.
There were more than 75 million washing machines sold in China in 2019 alone.
I say the demand here in the U.S. for this type of appliance is low by any measure. That's not a recipe for inflationary pressure in the pricing of these appliances.
A billionaire that I once worked for, told me: “When there is no one left to sell to, governments start wars. Things blown up have to be rebuilt”.
He was a wise old man. Self-made billionaire. Yet, very humble. That last part didn’t pass down to his heirs.
I need to look into the deflationary vs inflationary aspects of our economy before I fall on one side or the other, but I do know this one thing. The people about to be body slammed by the current administration's fiscal disasters are the the working poor who voted for Biden. If you are making $14.50 (going rate in our area right now) per hour to work at Arby’s, in real economic terms I would guesstimate you are making the equivalent of $12.50 an hour just two years ago. At the current rate of inflation, you would need $20 per hour to comfortably afford rent, gas, food and utilities. The working poor, predominantly Black and Hispanic workers will be the hardest hit by either inflation or deflation. The next group will be those Gen Z and Millennial workers out of college and finding good jobs out of reach. I lived through Carter, this economy is already looking to be far worse.
Hyper inflation always precedes debt deflation.
When the music stops, there’s just not enough chairs.
Some people say its was caused by women's lib groups pushing women into the work place. Other's point to economic policies that have forced most families to require two incomes. In the past children assisted on family farms or helped parents in old age. Something, that has seemed to decline with Social Security and Medicare. Might explain the expansion of assisted living facilities. In the cities or on farms, the more children, the better the families overall economic conditions once the children reached working age. But, even in the Sixties and Seventies, as family farms declined, two children households were common, three and four children were not uncommon. It was not racial either. Black and Hispanic friends my age have two or more siblings also. Is it a sense of entitlement or selfishness with a generation that does not want responsibility?
Being military, I have a very mixed group of friends. The majority of whom are military. Most have two or more children. I find it odd because even the younger families have multiple children. The military no longer pays additional money for each child, that ended decades ago. You have some who prefer no children now, but plan to have children later. But the vast majority have at least one child and plan to have another. It may be a case of stability, I do not know. Maybe if the feds/States changed policy and cut federal income taxes by 50% for any family with four or more children living in the household. When I was young, a family I grew up with had nine children. The father used to joke about not paying State and Federal taxes after the ninth child. Maybe that is the way forward?
Most of the consumer goods are made in China, including for the US market.
Whatever problems with saturated demand they have in the US they’d compensate by shipping to Indonesia or Nigeria.
You still have as much consumer goods on market, and the dollars are keep printed.
Whirlpool is one example, but it doesn’t make difference.
I’ve told this before, but the gov’t has no reason to be efficient. A grad school friend of mine when to work for a relative new agency in DC back in the mid-60’s. After a few months there, the director came through and told everyone to stop processing their work...let it pile up in their in-boxes until he said otherwise. Several days later, there was a “surprise” visit by a Congressional oversight committee and a couple of GAO workers. His director pleaded: “See how overworked we are! I need more workers!”
Really?
In DC your invitation to black tie affairs is directly proportional to the number of people under your control. My friend worked for the newly-formed EPA.
A week after the warranty expires.
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