IMF head Christine Lagarde warns of deflation risks

Generali

grizzly1911 wrote: »

Jeez you would think they would learn...... More likely to find dragons teeth or rocking horse pooh.

A Google search didn't throw up anything??

When builders were putting up the fancy housing in Notting Hill etc. they would normally build a small row of 3 or 4 at a time as that's what they could finance. When the banking bust came in the 1870s, the builders couldn't draw down the funds they needed to finish building and the roads were nicknamed dragons' teeth as there'd be a couple of huge houses then a gap that might have a half build basement or something then a couple more huge houses and so on.

Generali

Graham_Devon wrote: »

Wasn't really talking about "winners and losers". Just stating that the average joe on the street, in a period of deflation is highliy unlikely to see their wages physically cut, and highly likely to benefit from the lower costs.

The problem is that these Average Joes work for other people and those people are having to accept lower prices for their products. The Average Joe will pretty soon find himself out of a job if that continues. Any job they are able to find is likely to be at a lower wage reflecting the lower prices companies are getting for their goods.

Graham_Devon

Generali wrote: »

The problem is that these Average Joes work for other people and those people are having to accept lower prices for their products. The Average Joe will pretty soon find himself out of a job if that continues. Any job they are able to find is likely to be at a lower wage reflecting the lower prices companies are getting for their goods.

True.

Though the second part, i.e. jobs advertised at lower rates has been happening over the last 5 years anyway. That was with inflation.

I just don't see it being that bad, unless, like I say, the deflation is very serious or prolonged (i.e several years).

Can certainly see why some don't like it, especially business. However to say wages will be cut due to deflation is a little extreme for my liking. May be cut for new posts, but hey, what's new?!

Those that fair the worst from deflation have probably had it best over the past 5 years, broadly speaking, IMHO. It's those at the coal face, normal families who have had to take the main hit, again, boradly speaking of inflation and lower wages.

Generali

Graham_Devon wrote: »

Though the second part, i.e. jobs advertised at lower rates has been happening over the last 5 years anyway. That was with inflation.

I just don't see it being that bad, unless, like I say, the deflation is very serious or prolonged (i.e several years).

Can certainly see why some don't like it, especially business. However to say wages will be cut due to deflation is a little extreme for my liking. May be cut for new posts, but hey, what's new?!

Those that fair the worst from deflation have probably had it best over the past 5 years, broadly speaking, IMHO. It's those at the coal face, normal families who have had to take the main hit, again, boradly speaking of inflation and lower wages.

Well business is what pays taxes and wages which run the country. What's bad for businesses is generally bad for everyone's financial well being ultimately.

Just because recent economic events have been poor in the UK they still could be far worse. Look at Ireland for example, they had higher GDP per head than the UK before all this started and were growing GDP at almost 6% a year.

Now they've got unemployment of 12.8% despite massive emigration (net emigration of 35,000 in 2013 from a population of just 4,500,000 the equivalent of a net half a million people leaving the UK!).

Graham_Devon

Generali wrote: »

Well business is what pays taxes and wages which run the country. What's bad for businesses is generally bad for everyone's financial well being ultimately..

And what's good for business, seems to be good for business & shareholders

Don't mind me, just being a bit cynical. Theories seem to have been totally undone over the last few years. We've seen some masisve business progression over the last few years. Unfortunately, a lot of them don't actually pay tax, or at least nowhere near the expected amounts.

I think I may have slowly turned into a semi socialist over the last few years. Scary!

Thrugelmir

Graham_Devon wrote: »

Unfortunately, a lot of them don't actually pay tax, or at least nowhere near the expected amounts.

Boycott them. The majority are well known US multinationals.

wotsthat

Graham_Devon wrote: »

If you hold assets....and more importantly, hold debt or have leveraged on those assets, it's probably not so good. But then these people are not the "average joe" people I'm talking about.

The average Joe is on the hook for his share of the national debt which will be increasing in real terms. In the meantime profits are falling, wages are under pressure and joblessness will likely increase.

Tax take will fall as the value of debt rises and, long term, default looms.

If Joe finds that some of the the stuff he's buying is falling in price I'm sure that will be welcome but we can all lower our personal inflation rates (mine's negative) but that's not the same as deflation.

Deflation can be classified as benign or malignant. Benign deflation is associated with an increase in productivity (often from the increased use of technology), which drives down prices. Malignant deflation is connected to weak demand that causes a downward spiral in prices. Insufficient demand, coupled with excess capacity, means firms are forced to reduce prices to move their inventories. Profits decline, and the demand for labor decreases. As unemployment soars, wages fall with prices, and the downward wage-price spiral continues.

Someone with your less than positive outlook expecting the nice sort of deflation is a surprise to be honest.

Loughton_Monkey

Graham_Devon wrote: »

And what's good for business, seems to be good for business & shareholders

Don't mind me, just being a bit cynical. Theories seem to have been totally undone over the last few years. We've seen some masisve business progression over the last few years. Unfortunately, a lot of them don't actually pay tax, or at least nowhere near the expected amounts.

I think I may have slowly turned into a semi socialist over the last few years. Scary!

"turned into"?
"semi"?

Wouldn't the words "always have been" and "raving" be slightly more accurate?