Economists expect report of first deflation in 54 years

[OzzyKP]

Aaaaaa.. $4/gal for gas is not peak oil bud. Try $20/gal mayby, who knows. The thing is that is would cause extreme chaos. No one would be investing ****. They would just be hoarding **** for the apocolypse. Only government intervention on a massive scale will prevent total breakdown of society.

Felch is totally right. We'll handle peak oil no problem. At that point renewable sources will be cheaper and industry will respond to that as quickly as possible. If people all walked more at $4/gallon, they'll find many ways to conserve or adapt to $20/gallon.

[Kidlicious]

Felch is totally right. We'll handle peak oil no problem. At that point renewable sources will be cheaper and industry will respond to that as quickly as possible. If people all walked more at $4/gallon, they'll find many ways to conserve or adapt to $20/gallon.

Ya'll can go ahead with your fantasies. The fact is that Cuba handled a peak oil situation well. Your fantasies are not debatable here. When a free market does handle something like peak oil then you will have something to bring to the table.

[Felch]

The fact is also that a planned economy in North Korea failed. So your argument is pretty weak.

[Kidlicious]

The fact is also that a planned economy in North Korea failed. So your argument is pretty weak.

The beauty of it is that no one has to repeat the NK policy if the situation repeats.

[VetLegion]

The difference between what happened in Argentina and what happens in the USA is that what happened in Argentina (those five years of recession with deflation) happened for artificial reasons.

Argentina had both budget and trade deficits because they had pegged their currency to the dollar in the early 90's , and that was a very popular policy.
Argentina had hyperinflation in the late 80's (I also experienced that) and pegging their currency to the dollar immediately killed inflation.

Why do you blame the budget deficits of the period on the peg? There were budget deficits in the 80's too and they were simply financed via inflation then. After pegging peso to the dollar they simply continued, only this time they caused the external debt to swell.

I do agree that the peg was a mistake though.

But the USA does not have an easy answer like Argentina in 2002, devaluate and the crisis will be over.

USA can print money. It's a policy that would hurt savers, which is why Japan was very reluctant to do it, but since there are no savers in the US and most US creditors hold dollars...

[Victor Galis]

I'm with Dan actually.

When an economic system is batting 0 for 30, at what point do you stop hoping that next time "gets it right" and start figuring there is some inevitible link between the government stepping in to control the economic life of a nation and the government stepping in to control the political/social life of a nation?

Before it gets to 0 for 30. Right now, communism with democracy is batting 0 for 0. I'm telling you that the failures of "communism" stem from totalitarian regimes that don't care about their people. You don't need to be a communist to **** up a country if you're trying to rob the people for the benefit of the elites. I'm not going to claim ideal communism is better than an ideal mixed economy, but I believe it would be workable.

About what capitalism has to do with WWI (you will slap your forehead, cause this is so obvious): Imperialism? Militarism? Both are capitalistic off-springs.

I disagree. Both pre-date capitalism. I'll deal with the rest of your post in a separate post.

[Victor Galis]

Imperialism wants ressources, or new markets for -producing goods and sell them with a profit-. The states paid for the protection of the colonies and thus painted them their national colors, but mostly colonialism was private people seeking profit overseas (or, in some cases, state-capitalist enterprises). Now, i dont have to list up all those colonial disputes you can read up on in any history school book, right? It was said, that the million little business disputes between the germans and the englishmen amounted to the greatest reason for war ever.

You think the little disputes mattered more than Kaiser Wilhelm's desire for a "Platz in der Sonne."

Now, i dont really have to show, how these two then impregnated each other and finally lead up to the great war, for which the assassination of crown prince Ferdinand and a jingoistic policy of Conrad von Hötzendorf and Kaiser Wilhelm II. was only the ignition.

Everyone agrees that was merely pretext, but Austria would have backed down without the implicit German guarantee of support. This puts the decision solely on the Germans. The Entente would not have started the war at that time.

Without the massively enhanced production capabilities of the industrial revolution, which took place under capitalistic conditions, the war would have not turned into a industrial slaughter house for which a whole generation was sacrificed. Without the conditioning of people to the needs of the machine (rather than vice versa), the tremendous ammount of stress could have never been born by the men at the front. Imagine laying under artillery fire for a whole fortnight, even hoping it will not end, for when it does, even worse things will happen. Sounds like the oridinary day in the factory at the day pretty much - only raised to a new level: Long workshifts of labor conditioned by machines (fast, monotone, loud and dirty), always under stress and fear, you might get ´fired´ (!). The machine is your friend, your enemy is human (but so are you). In that sense, WWI even ´refined´ capitalism, as it showed, that people can not be totally submitted to machines, without reaching a state which can only be called insane even within its categories.

The slaughter was a product of new and deadly weapons and mass mobilization. The latter was a product of Napoleon's time, the latter ensured that men died instead of having a chance to run as in earlier times. Many engagements that would have involved mass rout in earlier times turned instead to mass slaughter.

Without financing the war on massive credits btw, it would have had to end after about 3 months at the most, since all the countries involved would have been utterly bankrupt by then. (It could be argued, that from that point on, America had already won the war, despite the fact, that it had two more years to go before it even entered it - and it did enter partly to make sure it would get his loans paid back).

Germany didn't have the benefits of modern finance. At best they could rely on their own populace.

America wanted ´freedom of trade´ - no wonder, his corps where by now operating globaly and it was not a co-incidence, that america entered the war about the commercial losses inflicted by the german subs. Germany wanted ore fields in the west and the economic colonization of russia.

Germany was also concerned about encirclement, wanted to strike before Russian military would be fully modernized in 1916-7. France wanted Alsace and Lorraine and to wipe the stain of their defeat in the Franco-Prussian war. There were plenty of non-economic aims.

[Barnabas]

Why do you blame the budget deficits of the period on the peg? There were budget deficits in the 80's too and they were simply financed via inflation then. After pegging peso to the dollar they simply continued, only this time they caused the external debt to swell.

I do agree that the peg was a mistake though.



USA can print money. It's a policy that would hurt savers, which is why Japan was very reluctant to do it, but since there are no savers in the US and most US creditors hold dollars...

Because of the peg, we had an overvalued currency, and because of that we had a large trade deficit which was covered first with dollars from privatization of public companies (that was only possible for a few years since we run out of public companies to sell), foreign investment dollars (which tends to disappear in times of crisis like the 1995 Mexico crisis or the 1998 south east asian stuff) and foreign debt, IMF and stuff.

The state had to spend more and more money to pay the foreign debt.
Back then they would say that as long as the GDp grows every year more than the debt, then there is no problem. But the GDP was measured in overvalued pesos and the debt was in dollars.

After the devaluation the deficit disappeared, Argentina had twin superavits (bufget and trade) the whole 2003-2008 period


Don't you think it would also hurt the USA? Perhaps the rest of the world will start looking for a new currency, or something entirely new. The USA has the machine of printing dollars, but they can't let the dollar become very cheap.

[VetLegion]

Actually, the state (as in government) only had to pay its own part of the external debt, not the debts of the private sector. Of course, this became difficult as the economy contracted. The question is, why did the state sharply increase its debt during the boom years?

http://en.wikipedia.org/wiki/Argentine_Currency_Board

Government debt increased sharply. Unwilling or unable to raise taxes, and precluded from printing money by the currency board system, the government's only other recourse to finance its budget deficit was to issue debt instruments in the capital markets. Public debt increased sharply from 29.5% of GDP in 1993 to 50.3% in 1999. Moreover, this debt was in foreign currency, since the domestic private savings remained low, and it took place despite large inflows of income from the privatization of formerly state-owned companies.

[VetLegion]

By the way, something similar to the Argentinian currency crisis is going on in the Baltic states right now. They've pegged their currencies to the euro and are now suffering difficulties because of it. Their neighbours all devaluated which made exporting hard. I've started a thread about it. It will be very interesting to see how it plays out.

[VetLegion]

Back on topic of this thread: UK's central bank said it plans to pursue quantitative easing any time now. This will of course put a stop to the deflation. However: bye, bye pound sterling.

[Agathon]

It is rare, but possible. Free markets make anything possible, so long as people are willing to agree to terms.

It's only possible in certain rare and local situations. There's no evidence that it will work to curb deflation on a global scale (one reason local banks will lend out money at negative interest rates is simply to reduce their holding of a local currency).

You're asking capitalists to give wealth away.

Unless you can explain how negative interest rates will work, you are working from a faith-based theory.

[Agathon]

I'm with Dan actually.

When an economic system is batting 0 for 30, at what point do you stop hoping that next time "gets it right" and start figuring there is some inevitible link between the government stepping in to control the economic life of a nation and the government stepping in to control the political/social life of a nation?

Not to point too finer point on it, but you cannot be familiar with Marx and make this claim.

If you want to call the Soviet Union and North Korea "communist", then be my guest. What you can't call them is "Marxist". At best you can call them "spontaneous attempts to create Marxist states".

Marx is crystal clear about one thing: Marxist communism will develop from within the advanced capitalist countries. This is because Marx thought that it was an inevitable consequence of capitalism.

Marx didn't say that communism would naturally develop from semi-feudal or colonized societies, for that reason.

His claim has yet to be falsified. Then again, so does its opposite. The whole point is to find reasons that make one or the other more likely.

[Felch]

If Marxism has never happened, then he couldn't have had any empirical evidence for his claims. In other words, Agathon, Marx was dealing in fairy tales.

I don't know if I claimed that loans at negative interest would be likely (I'm not about to re-read even my own posts in this thread), but they are a possibility. The free market allows people to do what they want, no matter how stupid.

[Kidlicious]

"The free market allows people to do what they want, no matter how stupid."