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Deflation’s On Its Way!?


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HOLA441
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HOLA442
Deflation ! i don't think so but wage deflation yes and this is what scum brown wanted all along.

Wage deflation is deflation. Wages are a second phase inflationary affect. If they don't rise now then the price of everything falls because no one can afford it.

Wage deflation and price inflation combined will make houses fall even further.

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HOLA443
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HOLA444
Are you trying to grind me down with ignorance?

Nope.

Just pointing out that the system only works due to general ignorance from the population.

Is money a claim on future labour? Ye sure, if you want it to be that, knock yourself out.

What does the average bloke on the omnibus think that money is though? That's the important bit. He thinks it's pounds and fivers, tenners and twenties. When he sees his balance at the ATM, he then pulls out his crisp banknotes and checking again, sees that his balance has gone down. When he makes payments to the bank, they want cash or a cheque backed by another bank (who have to have "money", don't they?) They send him account statements with £ signs and numbers on it, so it must be "money", right?

The complete and utter misaprehension of how the banking system works on the part of J. Public is how the whole thing operates. This is the strength and the weakness of the banking system.

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HOLA445
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HOLA446
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HOLA447
Wages can go down as every thing else goes up unless you are working for councils

Immigration by the poles have helped to kill the building trades and i don't buy into the propaganda that they are all going home.

Deflation ! i don't think so but wage deflation yes and this is what scum brown wanted all along.

They may not be ALL going home, but lots have left for a better life from around my way.

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HOLA448
This is over my head. All I want to know is should I be hoarding cash in a biscuit tin for a rainy day.

Cash in a biscuit tin is no good as Brown keeps printing money so the contents of your biscuit tin is woth less each year.

Putting it in a bank is better but the interest you get is less than the real rate of inflation so i just goes down slower than in a tin.

Gold/Silver may or may not hold up against inflation.

You are playing with the devil that has all paths covered but do keep 1000 quid in cash in case all hell breaks losse and stock up on food that also fights against inflation

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HOLA449
Wage deflation is deflation. Wages are a second phase inflationary affect. If they don't rise now then the price of everything falls because no one can afford it.

Wage deflation and price inflation combined will make houses fall even further.

You're thinking like an American. We're a country of 50m and we don't produce anything - so our wages will affect the price of goods much less than in the past. Margins may be cut and the local labour cost contribution reduced, but we are competing with the rest of the world for these goods with a currency that is being rapidly debased. The result is you buy less, ie quality of life is reduced.

As for gold - if you could keep hold of it in 1929 you would have done rather well. In the hyperinflationary scenario of course you would do very well. Sounds like a no brainer to me.

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HOLA4410
This is over my head. All I want to know is should I be hoarding cash in a biscuit tin for a rainy day.

Definitely; a wise hedge against a run on your bank and the inconvenience of holding physical gold.

Luckily, I can help you here as I have a large number of biscuit tins buried in my garden, which is protected by a thick privet hedge and a libidinous Jack Russell terrier.

Give me your cash for safe-keeping and in return I will send you a picture of the tin and money plus an option to increase your cash by purchasing pictures of other biscuit tins and their contents.

By the way, this is a safe deal as my late departed business partner was a major figure in Nigerian banking and I have $100,000,000 dollars of his in a very big biscuit tin together with a packet of jammy dodgers.

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HOLA4411

I don't really get this. Can someone correct my example?

1)

$100 and 4 houses exists. (Nothing else in this simple example)

Houses will tend towards $25 each.

2)

Add in a bank who by the magic of fractional reserve banking make it seem like there's $1000

Houses will tend towards $250 each

3)

Credit Crunch. Bank reigns back the amount lent to $500

Houses will tend towards $125

I know it's a simple example, but is there any eason you couldn't substitute food, oil or even work for houses.

Does it matter if the money is real or debt? How can you tell the difference?

Can the government print enough money to negate the crunch in the lending?

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HOLA4412
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HOLA4413
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HOLA4414
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HOLA4415
no, a new money system would arrive via market forces. Money is the most bartered good in a free market. (Always reverts throughout history to gold and silver is left to it's won devices.)

Are you saying we should use gold and silver coins again?

This creates the problem of people snipping off the edges of the coins, look at your history book.

Printed money is only sensible option but it's still not flawless as it can be forged, but then again so too can gold and silver the vast majority of people here wouldn't know if something was really gold or silver and I doubt you would either.

Gold and silver requires trust as well. Also rarity does not equal value my sh*t is rare because I'm the only one that produces it but that doesn't mean to say it has value.

However if anyone would like some of my sh*t I will sell it to you at $1000 a ounce.

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HOLA4416
I don't really get this. Can someone correct my example?

1)

$100 and 4 houses exists. (Nothing else in this simple example)

Houses will tend towards $25 each.

2)

Add in a bank who by the magic of fractional reserve banking make it seem like there's $1000

Houses will tend towards $250 each

3)

Credit Crunch. Bank reigns back the amount lent to $500

Houses will tend towards $125

I know it's a simple example, but is there any eason you couldn't substitute food, oil or even work for houses.

Does it matter if the money is real or debt? How can you tell the difference?

Can the government print enough money to negate the crunch in the lending?

Money is supposed to provide a universal medium of exchange for goods and services.

Therefore a unit of money should be able to secure an arbitrary amount of a given kind of labour or an arbitrary amount of a given product. It shouldn't really vary that much except in cases of market supply and demand for a service/goods.

Without it, we'd be spending all our time farming and then bartering surplus food for primitive goods.

Inflation is when the amount of money increases, but the amount of goods and services out there doesn't. Hence money becomes worth less and it costs you more to buy a given service or product.

Banks are allowed to create money (credit) against their capital base, in exchange for a future promise of repayment. ie. The person will work to produce that money, or has access to raw materials/goods worth that much money over the repayment period. They take the risk that the credit won't be repaid and in return get to charge interest. They are allowed to create much more credit than they actually have existing assets to cover.

When banks create more money than can possibly be repaid, we have a very big problem. It's immensely inflationary in the short term but as the borrowers default on repayment the banks (if they haven't done their risk management properly) find their capital base being eroded and their ability to lend severely curtailed.

The government can either let this happen and many banks will go to the wall, along with people's savings, or it can 'print up' loads of new money to save the banks' asses. This will have a massively inflationary effect as all the 'new money' that the banks foolishly created is still out there and they retain the ability to lend (albeit curtailed to sensible levels again, at least in the short term) as if nothing had happened.

I'd say the latter course of action is ultimately more likely for the governments.

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HOLA4417
Nope.

Money is a medium of exchange.

if I swap goats fot cows by using weasels as a middle step, then weasels are money.

Most people think that legal tender is money - that's what they accept as medium of exchange on a daily basis, and that is what the commercial banks pretend to have. When they stop accepting the banks lies and assurances and want legal tender instead, the banks are knackered and runs occur.

The banks are trapped by their own confidence trick.

So, if you swap goats for cows by using weasels as a middle step, then weasels are money, but if you swap goats for cows by using fiat money, as a middle step, it isn't money.

There seems to be a logical contradiction.

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HOLA4418
So, if you swap goats for cows by using weasels as a middle step, then weasels are money, but if you swap goats for cows by using fiat money, as a middle step, it isn't money.

There seems to be a logical contradiction.

The difference is I chose weasels and that fiat money was forced upon me.

But yes, this is otherwise correct - fiat has succesfully displaced other mediums of exchange.

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HOLA4419
I don't really get this. Can someone correct my example?

1)

$100 and 4 houses exists. (Nothing else in this simple example)

Houses will tend towards $25 each.

2)

Add in a bank who by the magic of fractional reserve banking make it seem like there's $1000

Houses will tend towards $250 each

3)

Credit Crunch. Bank reigns back the amount lent to $500

Houses will tend towards $125

I know it's a simple example, but is there any eason you couldn't substitute food, oil or even work for houses.

Does it matter if the money is real or debt? How can you tell the difference?

Can the government print enough money to negate the crunch in the lending?

The key here is the "make it seem".

Lies = credit.

When lies are replaced by $ then there will be mad levels of inflation.

Also note that no one owes the banker anything because he is a fraudster. All the bankers should be in jail, from Mervyn King on down to the spotty oik wh counts out twenties in the lovcal branch.

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HOLA4420
Are you saying we should use gold and silver coins again?

This creates the problem of people snipping off the edges of the coins, look at your history book.

Printed money is only sensible option but it's still not flawless as it can be forged, but then again so too can gold and silver the vast majority of people here wouldn't know if something was really gold or silver and I doubt you would either.

Gold and silver requires trust as well. Also rarity does not equal value my sh*t is rare because I'm the only one that produces it but that doesn't mean to say it has value.

However if anyone would like some of my sh*t I will sell it to you at $1000 a ounce.

Printed money is doomed - the PC and home printing advances mean it can't have more than a decade left in any event.

As for alternatives - who cares?

You are quite capable of making your own bargains. There is no need for you or me or anyone else coming up with a "universal" medium of exchange.

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HOLA4421
When banks create more money than can possibly be repaid, we have a very big problem. It's immensely inflationary in the short term but as the borrowers default on repayment the banks (if they haven't done their risk management properly) find their capital base being eroded and their ability to lend severely curtailed.

The government can either let this happen and many banks will go to the wall, along with people's savings, or it can 'print up' loads of new money to save the banks' asses. This will have a massively inflationary effect as all the 'new money' that the banks foolishly created is still out there and they retain the ability to lend (albeit curtailed to sensible levels again, at least in the short term) as if nothing had happened.

I'd say the latter course of action is ultimately more likely for the governments.

something that's been puzzling me about the whole inflation/deflation debate for a while is.. if you're right and banks do continue to lend, don't wages need to continue to rise so that people can service the debt? If wages stagnate or fall (as there are some indications might be happening in my industry (IT)) whilst essential commodity prices increase, the number of people able to take on more debt and service it will surely also decrease, leading to a spiral of more defaults and less lending? :unsure:

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HOLA4422
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HOLA4423
Common sense

$ unfunded liabilties please explain in a deflationarily correct manner how the 100+ trillion is paid.

£ same story with public sector pensions etc etc (though not as bad in a global sense as £ in not reserve currency)

it is not possible, faith is all they have left, end of story.

do any of you people understand what repatriated inflation actually IS ffs....all the dollar and pounds come back from overseas and go into real stuff just like in the early 20's in germany......*poof* end of monetary system...reset.

the ignorance about fiat money gold/silver etc is only natural since 1971 people have had a good run with paper money for the most part, that is about to end..

good luck all.

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HOLA4424
$ unfunded liabilties please explain in a deflationarily correct manner how the 100+ trillion is paid.

£ same story with public sector pensions etc etc (though not as bad in a global sense as £ in not reserve currency)

it is not possible, faith is all they have left, end of story.

do any of you people understand what repatriated inflation actually IS ffs....all the dollar and pounds come back from overseas and go into real stuff just like in the early 20's in germany......*poof* end of monetary system...reset.

the ignorance about fiat money gold/silver etc is only natural since 1971 people have had a good run with paper money for the most part, that is about to end..

good luck all.

Whether 'unfunded liabilities' are going to be paid is an irrelevance-in a deflationary environment these liabilities will fall which is fairly obvious to anyone with half a brain cell.

I think you will also find that at this point in time due to several trillionsworth of INSOLVENCY, that monetary repatriation is what they are desperately trying to STIMULATE by weakening the dollar in a desperate effort to increase exports and reignite economic growth-ie forcing the hands of those who hold dollar reserves to part company with it in exchange for goods or services....and you talk about ignorance like you have even half a clue? DO me a lemon for crying out loud!

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HOLA4425
I don't really get this. Can someone correct my example?

1)

$100 and 4 houses exists. (Nothing else in this simple example)

Houses will tend towards $25 each.

2)

Add in a bank who by the magic of fractional reserve banking make it seem like there's $1000

Houses will tend towards $250 each

...

As I see it, at least when the times are good, there is no limit to the amount of money the fractional reserve system can create.

Not that I know all that much about how Basel I/II work but it seems if the bank has $10 dollars as savings they can creat $300 of loans. Chances are that $10 will come back as more savings to generate more loans. Plus if you can sell on those $300 of loans for $310 you can still make $300 loan and you've made $10 in profit. Now if "all" we have is 4 houses then only 4 loans can ever be made which is probably the limiting factor that would prevent some sort of ridiculous hyperinflation and generation of credit. If however you add into the mix derivative instruments based on the ability of the loans to be repaid or the price of the house in x years and some hedge fund comes along to the bank and offers the loans it bought off the bank as collateral for a further loan then the whole thing starts to get out of control. But that may not be how it works.

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