Monetary inflation and credit deflation

CLAPTON

jamesd wrote: »

More goods, same money, hence less money per item, which is a definition of deflation. Adding more money supply is the remedy in that case.

I'm not confusing volume of goods and services with monetary value. The two are linked, in part by the need to provide financial benefits to their producers for increases in production in some monetary way.

I nowhere see any reference to MORE goods in the definition of deflation; just cheaper goods per item in general


why are cheaper items (on average) a bad thing that 'needs a 'remedy' of printing more paper money

I thought that cheaper goods and services were things that basically made us all richer.

jamesd

CLAPTON wrote: »

I nowhere see any reference to MORE goods in the definition of deflation; just cheaper goods per item in general

More goods, same amount of money. That can only happen if the goods have become cheaper on average.

CLAPTON wrote: »

why are cheaper items (on average) a bad thing that 'needs a 'remedy' of printing more paper money

The article at wikipedia explains the possible issues with deflation.

Mortabre_2

I can certainly see inflation in the smaller amount of shopping for the same amount of pounds.

This is days before the VAT goes up so that is not the reason.

I would love know the real inflation figures for the UK, any estimates? There is no doubt the government figures are wrong.

Yes there is a deflation in outstanding revolving credit, I work in the banking industry and the crisis is far worse for the banks than most realise.

Banks only make money from people creating debt and paying interest to the bank on the debt they just created. People and businesses are paying off debt rather than creating more debt. This causes a deflation in outstanding revolving credit. At the same time there is an inflation of base money. The energy built up from all that currency the B.O.England added to the supply is now showing up. All that currency that was created and given to the banks and others, and all the huge bonuses that were created out of thin air and given to the bankers. This all stores up energy and now showing up in the currency supply.

Everyone knows the UK will follow the rest of the world in adding even more currency to the worlds supply which will cause more inflation to base money as outstanding revolving credit continues to fall.

mbga9pgf

People and businesses are paying off debt rather than creating more debt.

Hmm,are yousure about that? They may be getting more intelligent about it however, porting from high interest rates to low ones.

http://creditaction.org.uk/

Total UK personal debt at the end of October 2010 stood at £1,452bn. The twelve-month growth rate increased 0.1% to 0.8%. Individuals owe more than what the whole country produces in a year.
Total lending in October 2010 rose by £1.3bn; secured lending increased by £1.0bn in the month; consumer credit lending increased by £0.3bn(total lending in Jan 2008 grew by £8.4bn).
Total secured lending on dwellings at the end of October 2010 stood at £1,236bn. The twelve-month growth rate remained at 0.8%.
Total consumer credit lending to individuals at the end of October 2010 was £216bn. The annual growth rate of consumer credit increased 0.4% to 0.6%.
UK banks and building societies wrote off £9.9bn of loans to individuals in the last 12 months to end Q3 2010. In Q3 2010 they wrote off £1.83bn (£740m of that was credit card debt). This amounts to a write-off of £20.10m a day.

I suppose if they are writing off more than they create, that could be the problem. But, technically, that could be a case of too much debt in the system couldnt it? They could actually end up manking more money by allowing the total debt drop and improving their writedown situation.

jamesd

The seasonally adjusted figures have been increasing. The ones without seasonal adjustment have been decreasing over recent months. Here are the numbers without seasonal adjustment (from table A5.2):

2008 Nov 1,458,546
Dec 1,457,818
2009 Jan 1,458,648
Feb 1,459,437
Mar 1,458,861
Apr 1,458,920
May 1,459,527
Jun 1,458,998
Jul 1,458,233
Aug 1,458,553
Sep 1,459,428
Oct 1,459,110
Nov 1,459,812
Dec 1,460,332
2010 Jan 1,462,421
Feb 1,462,221
Mar 1,459,272
Apr 1,458,528
May 1,458,047
Jun 1,456,497
Jul 1,455,734
Aug 1,456,211
Sep 1,455,303
Oct 1,452,113

The increases in lending are substantially below inflation, so real inflation-adjusted lending has been decreasing.