The US Economic Crisis: Inflation vs. Deflation

[bobichina]

I love your knowledge and your slides, but your voice sounds boring to death!

[Toonces8]

Monetary supply determines whether there is inflation or deflation. The effect is an increase or decrease in the cost of items.

[WideWorldOfWisdom]

Wait a minute. You just said "inflation is an increase in the money, deflation is a decrease in the supply of money."

Then you went right into saying "we were in a deflationary period, stock market went down, housing prices went down..."

That sounds to me like you're saying PRICES determine inflation or deflation. Which are you claiming?

[KLguy133]

No no no Inflation is NOT JUST rising prices , it is rising CPI get it ? you can have deflating prices as in asset prices [ like RE ] and have inflation - a rising CPI.

Deflation is the opposite when CPI decreases.

[30percentplusreturns]

Whether its inflation or deflation that will happen within the next few years, im still exchanging my dollars for physical silver bullion. A $1 bill is the same as a 10$ bill is the same as a $100 bill. Nothing is different. Why buy all the silver you can get your hands on with $100 bills because in the end, those $100 bills wont be worth the paper they are printed on. In the end, a $1 note will be worth the same as a $100 note. There is no difference. You might as well exchange it now

[KLguy133]

maybe maybe not.

Precious metals may be a good store of value but there is a security risk.

People with bags of gold/silver tend to get robbed.

[TheMetalPerson]

This is a myth. Tons of cartoons love to make you believe that holding physical metals will put you at risk of burglars. Remember who owns the media. Life isn't a cartoon. If you think you're more likely to lose your savings from a burglar than you are from the federal reserve, your stuff will no doubt be stolen by the federal reserve. Life is scary no matter how you approach it.

[KLguy133]

Then why not store essentials like food, medicines and weapons since this will be infinitely more useful in a total meltdown than gold and silver, not to mention safer.

[TheMetalPerson]

In most 3rd world countries you'll find their food and drink prices to be to your taste.

It costs 50 cents for a chicken sandwich and french fries in educator. These low prices suggest that people don't consume as much, not that their food is worth less.

Even though it costs more to buy a sandwich in the US, one US sandwich doesn't buy 10 Ecuadorian sandwiches. The value of your sandwich has nowhere to go but down, but the value of silver is international.

[KLguy133]

huh? what does that have to do with the price of guns ?

[TheMetalPerson]

Sorry, youtube was bugging before while i was commenting. and "educator"->"Ecuador"

I agree with you about guns. More importantly, I think people should keep their cars well maintained. Basically you should have all the supplies you need before converting your remaining money to metals.

I think we mostly agree. Buy what you need first and use it to protect what you've worked for all your life. I just thought you were one of those people suggesting to spend 5000 dollars on food reserves.

[gdemerkl]

There is a mistake in this PPT: it states

Inflation + Deflation = Stagflation

The correct one is

Recession + Inflation = Stagflation

You're welcome ;-)

[KLguy133]

hehehehehe !

[JohnnyLion66]

Whatever Obama doesn't say to the banks, deflation will.

[cowboycarl04]

Wiemar Germany 1919 - deflation and economic collapse... government prints money to pay off debts and pay workers.

1923 - Hyperinflation in full force.

welcome to our future.

[HermanniSan]

Well, shouldn't the government spend on those more expensive commodities? If that happens it's still putting more capital into the system. Unless it sells other assets. I think everything is connected and these definitions work fine in their given perspective.

[Esoteric604]

Gasoline, food, energy... all of these things are going to cost a lot more money and these comprise an extremely large chunk of the average person's living expenses. CPI numbers ignore this reality.

[thefayed]

Well not really, rent/morgages are by far the biggest cost. Also it is not true that an increase in money supply increases inflation, it can happen like that, but in Japan money supply increased and there was little inflation.

[TheMetalPerson]

You're right; An increase in the money supply doesn't cause inflation, rather an increase in the money supply IS inflation according to all non-Keynesian school economists.

[Esoteric604]

His definition of inflation completely clashes with his own analysis.

Inflation: an increase in the money supply

Up to 2008 there wasn't as great an increase in the money supply as there is now. Inflation isn't the increase in value of various asset classes. Nor is deflation a simple decrease in value of various asset classes.

Byt the end of this there is going to be ~2-3 trillion extra dollars chasing a much more limited supply of goods (due to recession)

[TheMetalPerson]

there was a huge increase in the money supply all the way up until 2008 when it abruptly stopped and started collapsing on itself, thus the bailout. When banks lend, money is created out of thin air. those were the housing and credit bubbles.

I do agree with you about how the prices of assets have nothing to do with inflation/deflation and that people get confused by this. It is that confusion that generally causes people to relate inflation/deflation to wages/prices, a Keynesian view.

[TheMetalPerson]

without bailouts, stimulus, quantitative easing, the money supply will decrease as people pay off or default on their loans faster than new loans are being created. The bailouts and stimulus, however, are clear evidence that the government is part of this scheme and will not allow the deflationary side of the business cycle (when debts are paid faster than created). Bailouts are touted as loans, but the whole reason for the bailouts is that total debt is going down. its the nail in the coffin

[mickeykozzi]

the price of assets can be seen in two forms 1) domestically 2) internationally

if someone invested against the US dollar 2 months ago then used thatprofit to purchase american goods, the price for that asset has decreased...wake up

[TheMetalPerson]

Considering my above comments made no mention to whether asset prices are increasing or decreasing, I don't see any relevance to your response. I agree that the price of domestic goods in the US has decreased in comparison to other countries, if that is what you're trying to say.

You don't really make it too clear what you're opposed to, but its obvious from your snide suggestion to 'wake up' that you think something I said was ignorant.

[TheMetalPerson]

sorry, i meant the price of our domestic good in comparison to foreign currencies, gold and silver, not their prices of domestic goods.