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According to Bernanke, deflation IS inflation because he'll extend cheap money indefinitely until the problem goes away...

It was this arguement more than any other that convinced me to go and get some yellow stuff.

Currency devaluation as a mechanism for encouraging inflation will:

1. Make UK workers more competeive.

2. Make our exports cheaper, stimulating manufacturing and services.

3. Erode debt.

What it will also do is:

1. Make all imports including raw materials and energy, more expensive.

Compare this to deflation:

1. Falling wages.

2. Rising export costs, killing the manufacturing and service industries.

3. Falling prices.

4. Debt increasing in real terms, relative to wages.

5. As a consequence of 3 and 4 the VAST MAJORITY of people with even moderate LTV mortgages will be in negative equity.

Obviously on the plus side:

1. Falling import costs - cheaper DVD players, food, clothes.

Just listing the above tells you - if any fiddling at the edges can be applied, it will, and central bankers will try and engineer and welcome INFLATION. They will attempt to induce inflation in the face of deflation or anything that even remotely looks like it.

INFLATION is the lesser of several evils - and if you're honest, you'll conclude the same.

i still think that , from a socio-political perspective, deflation is less scary for governments than inflation - no strikes, rioting, less unemployment (as they can lower wages as an alternative to throwing people out of work completely).

think about it why is the governement so desperate to fiddle inflation figures DOWNWARDS?

Edited by Milkshock
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i still think that , from a socio-political perspective, deflation is less scary for governments than inflation - no strikes, rioting, less unemployment (as they can lower wages as an alternative to throwing people out of work completely).

think about it why is the governement so desperate to fiddle inflation figures DOWNWARDS?

I can't believe they wanted "bubble" inflation in asset classes like property. I believe the government would really like this not to have happened and for it to just go away now it has...

I assume the reason they deny inflation is because it would be a precursor to higher interest rates, which is something they didn't want to have in the last 5 or more years in a vain attempt to stimulate the economy away from recession...

I do believe that a house price bubble wasn't an aim of this policy. For everything everyone says about it being a "faked" feeling of wealth on which NuLab won the last election and restored the social housing programme in one hit, there's a counter argument that says, just like a benign low-inflation environment, governments prefer mediocrity during their reign. The more uneventful, the longer they're in power and the richer they become.

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...and strikes are public sector workers way of demanding higher wages. In the private sector, people move jobs more frequently and employers realise pay rises are necessary to keep them...

I still think "growth" stimulates positive mental attitude for all the reasons I previously mentioned. As far as I know, the global system of engineered inflation is designed to do this because us as human beings require this as motivation - a kind of mild economic carrot. Otherwise, why would we have inflation at all - just a gold backed currency and a pile of cash we can either add to, or spend from. Those who lived to save in the first 15 years of their life could then "retire" with careful spending. As it is, inflation reduces the worth of capital and forces people to keep earning and moving forward. Extreme forms of inflation, such as HPI, make us all slaves to the money system - which most people feel is equally as undesirable as having no inflation at all.

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Been doing a little number crunching!

UK population a little over 60 million
Number of employed aprox 29 million
Number in productive jobs ie industry and agriculture aprox 6 million
Number of public sector jobs aprox 6 million
Number in other service jobs aprox 17 million

Of course while many service jobs are absolutely essential in our society, I cannot escape the conclusion that six million workers essentially support sixty million people.

Less than half the population actually work!

IMOH the BoE has to continue to expand money supply simply to maintain the status quo.

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You only have to look to France to see protectionism creeping back in gradually (I don't think they ever adopted a real free market approach anyway) in response to economic troubles.

Don't they still employ people in Toulouse to manually open, check and reseal each piece of electronic goods coming into France?

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I can't believe they wanted "bubble" inflation in asset classes like property.

Firmly agree.

I believe that "property" was just a means to an end. The govt know that they need to maintain JOBS. Without jobs you get civil unrest. Like I said, property was a means to an end after the internet crash.

Engage scapegoating mode now, Tony. When will the Americans lead us into recession?

Oh shit, I forgot. I'm supposed to be a V.I. troll now. Let's try... "It will rise and rise forver, just like a pancake".

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Wished you had done a poll?

You may have guessed by now you would have needed lots of in-between choices

Perhaps a poll would have been a good idea.

Perhaps there is a reason for the "in between" answers.

For those (few) who may remember some of my posts will recall (perhaps?) that I think deflation is the most likely outcome from a debt bubble.

Unfortunately governments, markets, banks and central banks have become more than adept at manipulating money and credit. However it is not clear if they ,in actuality, have a clue what they are doing other than trying to influence credit (to try to produce their short term desired outcome). Therefore any deflationary or inflationary forcast should, IMO, be balanced. One can not predict the future with absolute certainty in this area.

Quite simply the same debt bubble scenario could be destroyed by either outcome. I think it is also hard predict - at THIS point - how the "crowd" will behave. Will they panic to hoard cash as real estate / SM's tank - even if the amount of notes in circulation is increasing rapidly?

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  • 3 weeks later...

I'm betting on mild deflation, followed by sharp inflation.

The deflation is already here, people have less money to spend,

the price of shit has to be cut to sell it.

Inflation will eventually hit for global reasons.

Natural gas costs are rising at a rate well into the double digits, and it's likely get worse not better.

Simultaneously the situation with oil doesn't look good at all.

Both of these drive inflation.

At some point the BoE will pull the plug on our easy money supply, which will

feck the housing market, and MEW driven credit even worse. This will set off

a chain of events that will likely be as bad as you can imagine it.

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The arguments for deflation are so persuasive until you end up with the end game (ie. the worthless FRB and fiat system that caused it all seeing the value of all its paper tokens go through the roof).

Trouble is, with the deflation scenario, eventually government runs out of money to pay public sector wages (sounds familiar) more people opt to work in the black market, cash in hand jobs etc, less tax take, less VAT take (sounds familiar) crime rises as people choose to steal what they can't afford to buy

IMO at that stage the government ceases to function (South Africa prior to Mandella's release) and great and rapid changes occur.

The alternative is for government to continue to print money to pay the wages of essential government workers (read police and armed forces) Hyperinflation!

Edited by watchinandwaiting
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