[MadIvan]

A word of warning. I doubt apart from Germany we will intimidate Japan, but it's going to probably be a while before boom times occur again.

Regards, Ivan

[MadIvan]

Bump!

[MadIvan]

The boring graph bit:

"There may be trouble ahead..."

Regards, Ivan

[snopercod]

wages rarely fall

No, the wages stay the same right up until the layoff. It happened here recently. The biggest employer in town told the union that the employees would have to accept a 20% pay cut if the company were to stay in business. They refused, and went on strike.

All 400 of them are on the dole, now.

On deflation. I've noticed a couple of trends. Tools are getting cheaper and cheaper. A Milwaukee [a top-of-the-line American toolmaker] Hole-Hawg drill or Sawzall reciprocating saw cost less now than they did 30 years ago. You can buy lesser-quality tools for a fraction of what they cost thirty years ago.

OTOH, food prices are going way up where I live. Fresh vegetables cost about 50% more than last year, I believe.

And something that I still don't understand. The price of beef on the hoof is the same or less than it was 30 years ago. But the price of hamburger is roughly 5 times what it was back then. I still haven't figured out how the ranchers can stay in business.

Thank God that beer is still affordable!

[thedugal]

I get tired of hearing about Japan's deflation being anything that any other country would have to worry about. Deflation is a symptom. The real problem is nationwide socialist corruption. In the 80's it was perfectly normal for a Japanese bank to create a child company and then loan the child company money for real estate which was overvalued anywhere from 10 to 1000 times with 0 intention of paying it back. With the exception of a few scapegoats who were given slap on the wrist sentences, the bandits are still in power. It's theft pure and simple. Estimates of the cost of these corrupt schemes is between 400 billion and 2 trillion US$. It makes Enron look like a petty pickpocket. Granted Americans can be docile (2 terms of Clinton), but if that crap went on in the U.S. there would have been a revolution. Japanese sheeple are like American sheeple in deep comma.

[Bon mots]

Good post. I read this article in the Economist already. There are good arguments as to why we will see deflation. Don't expect the stock market to rebound either.

I have recently read this book:
Conquer the Crash
It makes some valid analyses and has good information despite the fact that it's sloppily written. The mathematical mistakes begin on page 14 in the hardcover version.(The percentage calculation errors actually soften the argument - the true picture is bleaker.)

You can click on my link and download the first chapter for free.

It confirms a lot of fears I have had. Gets a bit into Elliot wave and revives Kondratieff cycles...

Like anything, you can't treat it as gospel, but it does raise interesting issues and expands upon the theme of this article.

[lasereye]

Seems to me we can't have a general deflation as long as the money supply keeps growing, which it is. If we were headed for real deflation, gold would be sliding, which it isn't.

[Stultis]

Back-of-the-envelope calculations suggest that, if the old Bundesbank were setting interest rates to suit Germany alone, they would now be below 2%. Worse still, not only is Germany unable to cut interest rates, but the EU's stability and growth pact also obstructs any fiscal easing. Nor can it devalue its currency. Stripped of all its macroeconomic policy weapons, Germany now runs a serious risk of following Japan into deflation.

Hehehe. Maybe this Euro thing wasn't such a bad idea after all! Note that Germany cannot wriggle her way out of this with monetary policy, and therefore will have to do so (or fail to do so) with pro-growth regulatory/labor/business policy. Liberal (leftist) European governments have for years used monetary policy shenanigans to enable (and cover for the failure of) their socialistic policies. America did the same under LBJ/Nixon/Ford/Cahtah. Tightening of monetary policy was a key component of the Reagan revolution, and helped immensely to push along and underscore the efficacy of other elements of his conservative agenda. Something similar is happening in Europe due to the Euro.

[Willie Green]

The world is still awash with excess capacity, in industries from telecoms and cars to airlines and banking. Until this is eliminated, downward pressure on inflation will persist.

"Excess capacity" being blamed again.
Who does this "economist" work for? The Sierra Club or Greenpeace?

[weikel]

I said the same thing on a previous thread to habs4ever he said I was nuts. There is more debt then actual currency if any disasters happen it could trigger bank causing the dissapearance of the funny money( ie money which doesn't have any real physical existence) created by the fractional banking system.

[hosepipe]

Ivan psssst, have you heard that:
" Economics is an entire scientific discipline of not knowing what you're talking about. " ...... -P.J. O'Rourke