I had a scary thought today.
What if this deflationary cycle keeps putting downward pressure on wages?
Won’t more and more people simply end up in the “Dead Zone?” What will that do to our debt-to-GDP ratio?
And yet you were probably against Obama increasing the minimum wage, which creates upward pressure on wages.
Oh, the delicious irony.
[quote]K2000 wrote:
And yet you were probably against Obama increasing the minimum wage, which creates upward pressure on wages.
Oh, the delicious irony.[/quote]
Hey, maybe Obama could just increase the minimum wage to $30/hr and push everyone right out of the dead zone, right - since there’s no supply/demand curve governing the price of low-skilled labor?
PRC, that “dead zone” link sent me back to the politics/world issues forum frontpage.
Taxes will increase, while wages (for some people) decrease. The lucky person who gets a raise will have to throw that extra income Obama’s way.
Big gov can’t be anything other than a welfare state. You can find goodies and comparisons here.
www.csbsju.edu/clemens/lecture/ClemensLect04.pdf
^fixed
I really never thought of it, but orion’s article was well done and really makes you think. IMO most people would rather work than just sit at home, but when it punishes you to work then why work. I would rather my tax dollars help people get out of the system then just once you are in you have to stay in.
Whatever deflationary situation we have are just about over with the exception of the housing market.
Look at what the schools did in California, they are preparing for Inflation. Gold is up to 1165 an ounce now.
Expect the minimum wage to rise because that is always the knee jerk reaction they do. We are wiping out the middle class.
[quote]John S. wrote:
Whatever deflationary situation we have are just about over with the exception of the housing market.
[/quote]
Has credit suddenly expanded, or is the money still piled up in the banks?
What does this have to do with inflation, from an Austrian perspective? The state of CA ran out of money, forcing them to cut back subsidies to the UC resulting in price increases. This is not anywhere near the same as “an expansion or contraction of the money supply.” You keep confusing neo-classical definitions of inflation with Austrian definitions. The CPI still indicates deflation, but the CPI itself is a lagging indicator of inflation/deflation. Price increases are not the cause of inflation. And education is not even factored into the CPI.
The money is going to be released very soon, Gold does not go up to 1165 in a deflationary period. If we where in a deflationary period why is India dumping the dollar to buy Gold. The CPI is cooked, look at the price of food and gas, hell just look at the price of everything it is starting to rise.
The truth is the dollar is buying less. Right now on the dollar index it is sitting at 75.11. When the schools raised the rates it is going to cause students to to have to take bigger loans. Banks are going to start releasing the money next year.
How much longer do you really expect the money to be held up in the banks? Maybe another 3-6 months? The schools economist understand this hence the 32% increase. Tho if you took student loans away completely the prices would plummet but that’s for another thread.
[quote]John S. wrote:
The money is going to be released very soon, Gold does not go up to 1165 in a deflationary period. If we where in a deflationary period why is India dumping the dollar to buy Gold.
[/quote]
Because of credit worries. Gold goes up during periods of credit contraction. This is the most massive period of credit contraction since Great Depression I.
You can argue about what ought to be on the CPI, but it’s not cooked. Everyone can use the same equations used to calculate it and arrive at the same answers. It continues to be negative.
Really? Everyone else is trying to drop the value of their money right along with us. I can buy an awful lot of stuff with my cash right now. Stores are practically begging you to come in and spend money.
It’s always next year, isn’t it? Peter Schiff: “Next year…!”
Who knows? The banks have an enormous amount of bad paper on their balance sheets. Japan went through this in the 1990s (same real estate boom, same everything) and they’re still experiencing deflation. Their central bank has interest rates pegged to zero and has for a long, long time (20 years), meaning they’re still trying to get out of deflation.
Even if inflation hits, the Fed can pull money back out of the economy. You do realize that, don’t you? That’s the Fed’s job: to keep inflation low. The Fed controls the money supply through interest rates, the reserve ratio, and the sale/purchase of t-bonds. It has 3 knobs it can turn to keep us out of inflation.
What? What do the prices of UC tuition have to do with anything? They were clearly caused by budgetary constraints at the state level.
From what I have heard from econimists and lenders the credit tightening is over. I think credit has gone back to the normal, where if you have good credit and a down payment you can get all the loans you want. We were use to easy credit where everyone could have it and not put anything down.
Next year is only 1 month away.
Stores can beg all they want for your money you still are spending more then you would have before. If you really think you can double the money supply and still have the same purchasing power then you must be a really avid follower of Keynesian.
The fact is we just had the most massive credit crunch since the great depression and the prices are almost back to where they were before the crunch.
Oil is going to sky rocket, Gold(the leading indicator of inflation) has sky rocketed. Silver is on the rise, Food prices are on the rise.
The dollar is worth less, if we where in a deflationary period the dollar would be worth more. I would have thought after seeing gold jump from 1000 to closing in on 1165 since our last debate would have been enough to show you that deflation is not happening.
I have said since our first debate give it a year or 2.
The last time Gold rose this fast was in the 1970’s, It indicated inflation then and it is indicating inflation now.
[quote]dmaddox wrote:
From what I have heard from econimists and lenders the credit tightening is over. I think credit has gone back to the normal, where if you have good credit and a down payment you can get all the loans you want. We were use to easy credit where everyone could have it and not put anything down.
Next year is only 1 month away.[/quote]
I disagree. Easy credit → normal credit still represents a credit contraction, or at least a plateau at the suckiness we’re at now.
Consumers are still loaded to the gills with debt and are trying to pay it down. Credit demand is low.
How many people are actually credit-worthy in a nation with 20% unemployment? Don’t you need a job to get a home loan? High unemployment feeds into the low demand for credit.
A couple more waves of ARMs still need to re-adjust (2010, at least).
[quote]dmaddox wrote:
From what I have heard from econimists and lenders the credit tightening is over. I think credit has gone back to the normal, where if you have good credit and a down payment you can get all the loans you want. We were use to easy credit where everyone could have it and not put anything down.
Next year is only 1 month away.[/quote]
This is what I was talking about, There are a lot of people ready to take out loans. The market is going to get flooded with dollars.
I have an 800 credit score and a 25% down payment on an investment property. 7 months ago I tried to buy a rental property, but the rates were in the 7-8% range. 2 months later it was 6 and half percent. Now I can get it in the 5 and half percent. Investment property loans will carry a 1 percent above the prime rate normally which is now. Back 6 months ago it was 2-3 percent premium. This shows that credit is coming back and not tightening. The fed could change the rates in a drop of a hate if inflation gets out of wack.
Texas’ economy is a little better than California so that might be our difference of opinion. It is just what we see and hear on the news everyday. It is getting better though. I just hope when the rest of the stimulus money comes available next year before elections that inflation does not sky rocket. We wont get hyperinflation but for example we might head to the 10-12 percent 30 home loan range in the next two to three years if the government does not watch itself.
[quote]dmaddox wrote:
I have an 800 credit score and a 25% down payment on an investment property. 7 months ago I tried to buy a rental property, but the rates were in the 7-8% range. 2 months later it was 6 and half percent. Now I can get it in the 5 and half percent. Investment property loans will carry a 1 percent above the prime rate normally which is now. Back 6 months ago it was 2-3 percent premium. This shows that credit is coming back and not tightening. The fed could change the rates in a drop of a hate if inflation gets out of wack.
Texas’ economy is a little better than California so that might be our difference of opinion. It is just what we see and hear on the news everyday. It is getting better though. I just hope when the rest of the stimulus money comes available next year before elections that inflation does not sky rocket. We wont get hyperinflation but for example we might head to the 10-12 percent 30 home loan range in the next two to three years if the government does not watch itself. [/quote]
a) The Texas economy is a lot better than CA.
b) Most people are not as credit worthy as you. I do agree that the interest rates dropping are a sign that they’re trying to get people to take out home loans (qualified people, that is). Few people have $100k laying around to be as credit worthy as you, though. Most people had a negative savings rate up until last year. You have provided valid indicators that the banks are at least trying to get people to borrow. The question is, how many people want to.
Meanwhile, credit card interest rates keep going up. What they’re giving on one hand, they’re taking away on another.
If there are a ton of credit-worthy people out there like you, we may yet pull out of this. I am not optimistic about that given the structurally high unemployment, high consumer debt, and falling wages.
Lending to small businesses remains abysmal, btw, which is not a good sign for job creation in this country.
Bernanke’s not dumb, though. If there is bad inflation, he’ll raise interest rates and sell treasuries.
[quote]PRCalDude wrote:
dmaddox wrote:
I have an 800 credit score and a 25% down payment on an investment property. 7 months ago I tried to buy a rental property, but the rates were in the 7-8% range. 2 months later it was 6 and half percent. Now I can get it in the 5 and half percent. Investment property loans will carry a 1 percent above the prime rate normally which is now. Back 6 months ago it was 2-3 percent premium. This shows that credit is coming back and not tightening. The fed could change the rates in a drop of a hate if inflation gets out of wack.
Texas’ economy is a little better than California so that might be our difference of opinion. It is just what we see and hear on the news everyday. It is getting better though. I just hope when the rest of the stimulus money comes available next year before elections that inflation does not sky rocket. We wont get hyperinflation but for example we might head to the 10-12 percent 30 home loan range in the next two to three years if the government does not watch itself.
a) The Texas economy is a lot better than CA.
b) Most people are not as credit worthy as you. I do agree that the interest rates dropping are a sign that they’re trying to get people to take out home loans (qualified people, that is). Few people have $100k laying around to be as credit worthy as you, though. Most people had a negative savings rate up until last year. You have provided valid indicators that the banks are at least trying to get people to borrow. The question is, how many people want to.
Meanwhile, credit card interest rates keep going up. What they’re giving on one hand, they’re taking away on another.
If there are a ton of credit-worthy people out there like you, we may yet pull out of this. I am not optimistic about that given the structurally high unemployment, high consumer debt, and falling wages.
Lending to small businesses remains abysmal, btw, which is not a good sign for job creation in this country.
Bernanke’s not dumb, though. If there is bad inflation, he’ll raise interest rates and sell treasuries. [/quote]
That I will believe when I see it-
The economy will turn around and he will hit the brakes hard.
Sure, thats the MO of this administration.
Never ever.