Deflation: The dog that didn't bark.

ruggedtoast

Graham, none of us want to have to suddenly start paying 15% on our mortgages so some pensioner can afford to put the second bar on.

Thrugelmir

Graham_Devon wrote: »

The policymakers who "never saw it coming".

The regulators who didn't really regulate (if they did, how on earth did Sub Prime happen)?

Even the Eurocrat's who let Greece etc into the Euro, and continue on the path pushing more resources to help hold it just above water, refusing to let it jump out or sink, knowing full well it can never sustain itself.

One word encapsulates them all.

Politicians.

Drive by ideology and a complete lack of expertise in any field outside the bubble they live in.

DiggerUK

Graham_Devon wrote: »

......Was deflation a scare tactic to vote in more QE and low interest rates to cover other bases?.....

Deflation, and inflation, are two sides of the same debased coin.

Before QE, there was deficit spending; printy printy by another name.
Prices bubble, bubble bursts, boom goes to bust, prices tank.
But that still leaves the inflationary overhang from all the funny money.

Governments from the 1980's fought the good fight against inflation by.....printing money.
Governments from 2007 fight the good fight against deflation by.....printing money.

No, none of you are missing anything. :huh:
..._

StevieJ

ruggedtoast wrote: »

Graham, none of us want to have to suddenly start paying 15% on our mortgages so some pensioner can afford to put the second bar on.

Don't be a t*** all your life

sabretoothtigger

For Keynesian economists, nothing is more catastrophic than debt deflation. After all, that’s what triggered the Great Depression during the 1930s.

The 30's saw government devalue money by 60%

If we have inflation of 5% per year we will achieve the same thing over a decade. Between 2007 and 2017 I believe we are set to repeat a similar mistake to the 30's which is stagnation


If we had taken bad debts, the money remaining would be used elsewhere on better ideas and to help growth.

As it is we favour large debtors as the government is biased and growth is not encouraged as the money stays with those most unable to repay, the worst ideas, the lowest growth

Thrugelmir

sabretoothtigger wrote: »

If we had taken bad debts, the money remaining would be used elsewhere on better ideas and to help growth.

Would have resulted in a collapse like Greece.

sabretoothtigger

A collapse of what, the bad debtors. Sure, but any good assets are reused and put to better growth then simply supporting bad debt.

The overall gain is that people do not waste time on something which has not worked and will not. Sucks if you have lent money and lose it but overall the economy is better off

Greece hasnt collapsed or written off enough of the bad debt. That should have occurred the first time they realised the government had faked its entry to the euro - every working day since refusing to do so has been wasted

Instead we waste time and energy patching up junk. People have to focus on what they do best, to do anything else is lower growth

Just 2% GDP growth gives a compound gain. We should bend over backwards to get that.
Instead we barely make 0%, the difference between the two scenarios becomes a gigantic loss worse then a 'collapse'