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Inflation Or Deflation - What's Your Bet?

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Is Mervyn King right to suggest inflation would be more dangerous than deflation for the UK? A surprising view or maybe not?

Traditionally most economists say deflation is the worse disease for an economy as it is even harder to eradicate than inflation, which can be cured by the blunt raising of interest rates.... until it works. Deflation can be unstoppable since consumers are always delaying purchases awaiting a better price like in Japan where they cannot cure their structural deficit.

Is it inflation or deflation we are headed for?

Edited by plummet expert

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Deflation can be unstoppable since consumers are always delaying purchases awaiting a better price like in Japan where they cannot cure their structural deficit.

That's largely ********. If people have the money and they want something they will generally buy it.

Edited by OnlyMe

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That's largely ********. If people have the money and they want something they will generally buy it.

For discretionary purchases is that still true? They account for a sizable proportion of spending.

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That's largely ********. If people have the money and they want something they will generally buy it.

Wholeheartedly agree. If your TV breaks, you buy a new one straight away (no one repairs anything these days), and computers have been falling in price for the entire history of the technology industry, but that's still one of the most vibrant, innovative and profitable fields of industry around today.

The only things that people delay buying in the expectation of price falls are non-essentials purchased with debt where there is a viable alternative - basically buying houses instead of paying rent.

The lazy economist's mantra that 'deflation leads to deferred purchases' pretty much only applies to housing and speculative investments, and if the economy is forever steered by these small elements of the economy (as we know it has been for at least the past 13 years), then we are aw' doomed.

Edited by WageslaveX14

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For discretionary purchases is that still true? They account for a sizable proportion of spending.

Yes, as an example look at technology goods - computers, tv's, anything really in this sector. The only time people tend to put off purchases in this sector is when it is known that one particular technology is going obsolete.

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Wholeheartedly agree. If your TV breaks, you buy a new one straight away (no one repairs anything these days), and computers have been falling in price for the entire history of the technology industry, but that's still one of the most vibrant, innovative and profitable fields of industry around today.

The only things that people delay buying in the expectation of price falls are non-essentials purchased with debt where there is a viable alternative - basically buying houses instead of paying rent.

The lazy economist's mantra that 'deflation leads to deferred purchases' pretty much only applies to housing and speculative investments, and if the economy is forever steered by these small elements of the economy (as we know it has been for at least the past 13 years), then we are aw' doomed.

I think you are right - only concern house prices and some markets - shows how utterly bent their whole game has become.

The reason both of us picked tech is becuase it is the one market where decreasing prices is the norm and there is almost no expectation whatsoever there whatever is bought will increase in price after purchase.

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Guest absolutezero

Inflation.

It's the time-honoured way.

This time will be no different.

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That's largely ********. If people have the money and they want something they will generally buy it.

Its largely bshit because deflation is just allowing the debt to default, it can happen very quickly if its allowed to and then you can rebuild from scratch with real growth, the reason Japans more fcked now than they were 20 years ago is precisely because theyve tried to stop deflation. Deflation is just the markets natural answer to malinvestment. Inflation is the govts natural answer because it is short term less painful but ultimately creates even more malinvestment as moral hazard teaches people to malinvest more. Ultimately though because of the ever greater malinvestment the ultimate reset becomes bigger and bigger until its unstoppable and deflation wins because even hyperinflation results in deflation when the currency is reset. The malinvestment will always ultimately be destroyed

Edited by Tamara De Lempicka

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Is Mervyn King right to suggest inflation would be more dangerous than deflation for the UK? A surprising view or maybe not?

Traditionally most economists say deflation is the worse disease for an economy as it is even harder to eradicate than inflation, which can be cured by the blunt raising of interest rates.... until it works. Deflation can be unstoppable since consumers are always delaying purchases awaiting a better price like in Japan where they cannot cure their structural deficit.

Is it inflation or deflation we are headed for?

Hyperstagflation.

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Deflation is not a disease it's part of the natural economic cycle but because of the feckwit politicians who love promising what they can't possible deliver and the stupidity of masses who prefer bu115h1t over reality deflation is deemed an evil. If you don't allow leverage to build deflation isn't a problem. If people understand salaries go up and down you don't have a problem.

Once people decide leverage is good deflation of course is evil because people/business can't service the debts.

You can't inflate forever, the economic system is like a pair of lungs just try breathing in forever and see how long you last.

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I think you are right - only concern house prices and some markets - shows how utterly bent their whole game has become.

The reason both of us picked tech is becuase it is the one market where decreasing prices is the norm and there is almost no expectation whatsoever there whatever is bought will increase in price after purchase.

I expect you read Bill Bonner's recent backpage Money Week column about deflation, where he says that rising and falling prices are a natural function of supply and demand in a properly functioning market enconomy - it's when govts and central banks think they are helping by warding off the 'evil' of deflation that things get distorted.

Also, if you see that prices are lower one day, you don't expect them to keep falling. I bought the box set of the World at War yesterday, as it had gone down from £100 to £25. This was a fully discretionary purchase, and I bought it because it was a good price and was too expensive beforehand. I didn't expect the price to be lower next week, next month or next year, though.

Further, there's a limit to how far the price of anything that people genuinely want can drop. Conversely, there is no limit to how much the price of something can be inflated. This is yet another reason for policy makers to allow deflation rather than stoke inflation.

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Inflation for sure - I got notified today of 35% increase in steel prices for construction - this year in July - yikes

And we buy in bulk!

Heard similar. The timing is odd though, haven't worked that out.

Also told that bulk construction material buyers have been asking for (and receiving) very large discounts on their purchases wih companies hqappy to give them to maintain turnover. How long this can last I don't know, maybe steel can;t be carried any more, or the market is controlled enough to push through across the board repricing.

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Capitalism is a flawed construct. The natural forces at play, within that structure right now, are overwhelmingly deflationary. Of course, the Inheritors of the crumbling architecture continue to buck against the weakness with persistent cycles of inflationary medicine. It's a painkiller - not a panacea. The choice is a common-sensual one. Keep hiding from the pain until no amount of morphine will save you from an agonising end. Or surrender to your vulnerability by surgically fixing the real problems, and recuperating slowly. Living to fight another day.

Which would you choose at this point - while you still have a choice?

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Heard similar. The timing is odd though, haven't worked that out.

Also told that bulk construction material buyers have been asking for (and receiving) very large discounts on their purchases wih companies hqappy to give them to maintain turnover. How long this can last I don't know, maybe steel can;t be carried any more, or the market is controlled enough to push through across the board repricing.

Seems we are passing that time, at some point, the prices have to be passed on - and it appears that time is this year - even with our large buying power we are being told it will impact on us, even after our normal bulk purchasing discounts. Also huge increases in Plastering materials, also at 17% by August.

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Capitalism is a flawed construct. The natural forces at play, within that structure right now, are overwhelmingly deflationary. Of course, the Inheritors of the crumbling architecture continue to buck against the weakness with persistent cycles of inflationary medicine. It's a painkiller - not a panacea. The choice is a common-sensual one. Keep hiding from the pain until no amount of morphine will save you from an agonising end. Or surrender to your vulnerability by surgically fixing the real problems, and recuperating slowly. Living to fight another day.

Which would you choose at this point - while you still have a choice?

No, capitalism is not a flawed construct. Capitalism isn't even a 'construct'. I'm not even sure what the ****** a 'construct' means in the real world, outside of some crackpot leftist critical theory.

I'll tell you what is a flawed construct though - and this one is a construct: a neo-feudal banking system sucking the life out of the serfs that pay them tribute for their means of exchange. This hyper-leveraged banking system cannot withstand monetary deflation without collapsing. Therein lies the problem for our economic system, which is probably better described as Fascism-lite, than capitalist.

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The economists don't know. Most say that deflation is a disease because most economists are funded by governments and most governments rely on inflation to keep things in their place.

Is Mervyn King right to suggest inflation would be more dangerous than deflation for the UK? A surprising view or maybe not?

Traditionally most economists say deflation is the worse disease for an economy as it is even harder to eradicate than inflation, which can be cured by the blunt raising of interest rates.... until it works. Deflation can be unstoppable since consumers are always delaying purchases awaiting a better price like in Japan where they cannot cure their structural deficit.

Is it inflation or deflation we are headed for?

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No, capitalism is not a flawed construct. Capitalism isn't even a 'construct'. I'm not even sure what the ****** a 'construct' means in the real world, outside of some crackpot leftist critical theory.

I'll tell you what is a flawed construct though - and this one is a construct: a neo-feudal banking system sucking the life out of the serfs that pay them tribute for their means of exchange. This hyper-leveraged banking system cannot withstand monetary deflation without collapsing. Therein lies the problem for our economic system, which is probably better described as Fascism-lite, than capitalist.

And, lo and behold, the very first reactionary post upholds the disease. It's gone on for so long (thousands of years) that the current confused crop of participants treat it as the very base of evolution.

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Its largely bshit because deflation is just allowing the debt to default, it can happen very quickly if its allowed to and then you can rebuild from scratch with real growth, the reason Japans more fcked now than they were 20 years ago is precisely because theyve tried to stop deflation. Deflation is just the markets natural answer to malinvestment. Inflation is the govts natural answer because it is short term less painful but ultimately creates even more malinvestment as moral hazard teaches people to malinvest more. Ultimately though because of the ever greater malinvestment the ultimate reset becomes bigger and bigger until its unstoppable and deflation wins because even hyperinflation results in deflation when the currency is reset. The malinvestment will always ultimately be destroyed

Perfect answer. I agree!

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Is Mervyn King right to suggest inflation would be more dangerous than deflation for the UK? A surprising view or maybe not?

Traditionally most economists say deflation is the worse disease for an economy as it is even harder to eradicate than inflation, which can be cured by the blunt raising of interest rates.... until it works. Deflation can be unstoppable since consumers are always delaying purchases awaiting a better price like in Japan where they cannot cure their structural deficit.

Is it inflation or deflation we are headed for?

Deflation.

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Is Mervyn King right to suggest inflation would be more dangerous than deflation for the UK? A surprising view or maybe not?

Traditionally most economists say deflation is the worse disease for an economy as it is even harder to eradicate than inflation, which can be cured by the blunt raising of interest rates.... until it works. Deflation can be unstoppable since consumers are always delaying purchases awaiting a better price like in Japan where they cannot cure their structural deficit.

Is it inflation or deflation we are headed for?

Both....

Economies that are over productive (Compared to avg) will deflate, those that over consume (compared to avg) will inflate or default and hyper inflate!

Tax differentials/size of state spending/quality of life and nationals ability to accept "Hard Times"... will define who wins/loses.

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  • 150 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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