J M

Be Very Afraid of Deflation

Right on. I've seen economists mention this over the past year and half as "demand destruction". High unemployment can really drive this, as well as reduced hiring wages and raises.

The inflation we saw in the 70's was higher wages chasing up the price of goods causing higher wages. Some people blame the unions. But, the inflation lately from higher oil and materials doesn't have this spiral. It cuts into consumer spending in other areas, without feeding back into wages.

Fewer wages due to unemployment and demand for workers causes lower prices, since less wages are chasing (demand) these goods (supply). As of a year ago, the US consumer bought 19% of world GDP, much of the spending supply temporary from home loans and credit cards. The lower prices bring less profit, less employment, less money buying goods ... in a spiral.

Records show that in the first half of this decade Greenspan was very afraid of deflation, and this was his reason for keeping rates low. This may have been a justified fear. It's perhaps too bad that he did not have controls to limit other bubbles fueled by these low rates. If you believe the CPI (which I don't) we were on the edge of deflation.


On Nov 10 11:15 AM ferguson wrote:

> "Less paid employees means less demand for goods, creating positive
> feedback, or as its known since Great Depression, deflationary spiral."
>
>
> Sounds like "negative feedback" to me.

The Reagan Counterrevolution

About the evils of regulation, the major I-Banks (Lehman, Bear, Merrill, Morgan Stanley, others) were leveraged out 30-to-1. I remember reading an article saying that the SEC changed regulation from a 12-to-1 limit to this higher level. I can't the article, though.

Do I have this straight? Any more info or opinions on this? Does this appear to be a big money supply control lever? Mr. Schiff, is this a part of the regulation that you feel should be eliminated? Thanks.

The Citi Exclusivity Agreement

Regardless of the signed Citi/Wachovia contract, since the FDIC didn't sign it, can they withdraw the "backing the assets charity gift to Citi" and see if Citi walks away?

The Citi Exclusivity Agreement

Regardless of the signed Citi/Wachovia contract, since the FDIC didn't sign it, can they withdraw the "backing the assets charity gift to Citi" and see if Citi walks away?

My Ten Predictions for 2008

Great article.

If the dollar drops 10% as mentioned, then this would help to fulfill the predictions of higher gold and oil?

Inflation historically has brought increasing home prices, though with the consumer's dollars going to servicing debt and higher costs along with tighter lending, perhaps this won't happen this time, or at least not as much? Opinions?