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Is this deflation?
Old 03-03-2009, 07:20 AM   #1
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Is this deflation?

Remind me why I don't like deflation.

My portfolio- read nest egg- is down well into double digits. But it isn't about the number of dollars, it's the buying power of those dollars.

Housing prices are down.
Fuel prices are down.
Cash is king- and as an ER, I live on a near cash.
Most businesses need the cash- and are willing to offer bargains.
The sleazeballs on Wall Street are on the run.
Rampant consumerism is being choked and shaken.

I must be missing something.
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Old 03-03-2009, 07:40 AM   #2
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Deflation is wonderful if you are living on a secure income source such as a pension and SS. Otherwise, it stinks.
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Old 03-03-2009, 07:58 AM   #3
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Quote:
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Remind me why I don't like deflation.
OK.

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Originally Posted by winger View Post
Housing prices are down.
That's no help unless you are planning to sell and buy a bigger, more expensive house. When you sell, you'll get less for your house.

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Originally Posted by winger View Post
Fuel prices are down.
Compared to what? They aren't as low now as they were last fall.

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Originally Posted by winger View Post
Cash is king- and as an ER, I live on a near cash.
Most businesses need the cash- and are willing to offer bargains.
We've had threads on this and it seems like a lot of the "sales" are just the same prices businesses have been offering all along. At least, in my case I haven't found much of anything to be cheaper.

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The sleazeballs on Wall Street are on the run.
Rampant consumerism is being choked and shaken.
OK, I'll give you these.

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Originally Posted by winger View Post
I must be missing something.
Have your utility expenditures gone down, or up? How about the cost of food or a used car?

Besides, I don't think we are in a decidedly deflationary period. (caveat: I know NOTHING about economics, trust me.) Anyhow, my uninformed opinion is that this is just a bobble before we start on a huge, inevitable inflationary spiral worse than what we saw in the 1980's.
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Old 03-03-2009, 08:03 AM   #4
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Fuel prices are down and that has helped a lot in filling up my car. But I haven't noticed any decline in my utility cost, cable, phone, insurance, property taxes, sales taxes, country club dues, and food cost. Everything I see at the grocery store is roughly the same if not higher. Let me know when deflation kicks in on these items.
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Old 03-03-2009, 08:05 AM   #5
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Deflation is wonderful if you are living on a secure income source such as a pension and SS. Otherwise, it stinks.
Not so wonderful if you're like my mom and spending all your time worrying about the economic future of your children and grandchildren.
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Old 03-03-2009, 09:06 AM   #6
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An animated look at consumerism in these tough economic times.
12/17/2008

NPR's esteemed science correspondent Robert Krulwich explains everything about everything

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Old 03-03-2009, 09:56 AM   #7
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[quote=Want2retire;790796]OK.


That's no help unless you are planning to sell and buy a bigger, more expensive house. When you sell, you'll get less for your house.

Since housing values (mostly) go up, isn't it a speculative purchase? There's a chance it may go down. I'm trying to think what else I could buy that always up in value........Wait. I live in Texas. Never mind.


Compared to what? They aren't as low now as they were last fall.

I guess the belief is that the price drop is temporary. No one wants to lower prices, do they?


We've had threads on this and it seems like a lot of the "sales" are just the same prices businesses have been offering all along. At least, in my case I haven't found much of anything to be cheaper.

I have bought a few of the cheaper things recently. LCD TV. An awesome deal on a cruise. We ate out a lot in February, and prices at my type of places continued to be reasonable.




Have your utility expenditures gone down, or up? How about the cost of food or a used car?

I don't think EVERYTHING goes down in a deflationary period, anymore than I think EVERYTHING goes up with inflation. BTW, my electric bill was $30 and some change for February.

I'm not an advocate of deflation, anymore than I love inflation. I'm certain extreme deflation would be.....as bad as extreme inflation.

I'm looking for the bright spots.
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Old 03-03-2009, 10:01 AM   #8
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BTW, my electric bill was $30 and some change for February.
Square footage aside, there are definite advantages to the full-time RV lifestyle...
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Old 03-03-2009, 10:27 AM   #9
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An animated look at consumerism in these tough economic times.
12/17/2008

NPR's esteemed science correspondent Robert Krulwich explains everything about everything
Unfortunately, that overly simplistic explanation is wrong.
(You could have substituted Globalization for deflation in the story and got and came to the same conclusion - Two stores - one sells US made product and one from China - US made more expensive, people buy Chinese made - US worker loses their job.)

Another way of looking at why it is wrong is inflation. If, people knew prices were going up they would buy now, prices go up and jobs are created - wrong again.
If it were true, all those African countries with high inflation rates would be great places to live.
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Old 03-03-2009, 07:10 PM   #10
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Square footage aside, there are definite advantages to the full-time RV lifestyle...
You caught me.
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Old 03-03-2009, 08:00 PM   #11
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The problem with deflation is that we don't have the tools to control it. We think we've figured out enough about monetary policy to keep inflation in check, so a modest amount of inflation is preferred. If it gets too high, the Fed has a bunch of tools to stomp it back down (political will permitting).

A modest amount of deflation, in it self, wouldn't be bad, but if it were to get out of control, we don't know how to fix it. So it's just better not to go there.
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Old 03-04-2009, 07:05 AM   #12
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Square footage aside, there are definite advantages to the full-time RV lifestyle...
We live on our boat seasonally in Florida. $650/month for slip rental, cable, water, and electricity. It's like a very tiny furnished (with a nautical motif) waterfront apartment with a great view! Of course, we have water in the basement!
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Old 03-04-2009, 09:12 AM   #13
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A modest amount of deflation, in it self, wouldn't be bad, but if it were to get out of control, we don't know how to fix it. So it's just better not to go there.
To fight deflation we first need to know what initiated it.

The tools to fight deflation are the opposite of what are used to fight inflation.
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Old 03-04-2009, 10:55 AM   #14
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If we do officially go into deflation, can we expect reimbursement from everyone who got a COLA bump in their retirement earnings for 2009?
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Old 03-04-2009, 04:55 PM   #15
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If we do officially go into deflation, can we expect reimbursement from everyone who got a COLA bump in their retirement earnings for 2009?
Would the CPI be the measure? It doesn't seem to be an especially relevant number, at least to me. Maybe when I grow up and get SS........
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Old 03-05-2009, 12:10 PM   #16
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rents in NYC are falling and commodities are down. add this to the credit crunch and it's called deflation.

i even bought some Lucky Brand jeans a few weeks ago for $50 each or so. In a few weeks i'm going to visit True Religion.

i've been visiting fatwallet for more than a decade and i remember in the last recession they had some insane deals on a lot of electronics. so far it's not as good as the last recession, but i'm seeing nice deals.

and my wife would visit the outlet stores and they had cheap prices on nice stuff like Diesel Jeans

one thing i remember is I was in Macy's one time around 1999 and saw a piece of clothing priced at $40 or so, on sale. 2 years later it's $20. and they had a lot of sales and coupons in the 2001 - 2003 period. bought a lot of stuff at great prices.
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Old 03-05-2009, 05:43 PM   #17
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rents in NYC are falling and commodities are down. add this to the credit crunch and it's called deflation.

i even bought some Lucky Brand jeans a few weeks ago for $50 each or so. In a few weeks i'm going to visit True Religion.

i've been visiting fatwallet for more than a decade and i remember in the last recession they had some insane deals on a lot of electronics. so far it's not as good as the last recession, but i'm seeing nice deals.

and my wife would visit the outlet stores and they had cheap prices on nice stuff like Diesel Jeans

one thing i remember is I was in Macy's one time around 1999 and saw a piece of clothing priced at $40 or so, on sale. 2 years later it's $20. and they had a lot of sales and coupons in the 2001 - 2003 period. bought a lot of stuff at great prices.
$50 for a pair of Lucky Brand jeans?.....wow!! I'm glad I buy my Lucky Brands at Goodwill. I just bought me two pairs and one Gap at $5 each.

Whatever we are having/or will have is affecting me little as I have prepared for such a time like this(you have to when you were born in a country like Argentina and lived through 5000% inflation). I'm still not "feeling" it. I will need to see alot of looting, express kidnappings, being held up at gun point while unloading your groceries from your car etc. We are not yet there gang....let's hope we don't venture into such scenario.
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Old 03-05-2009, 07:59 PM   #18
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The tools to fight deflation are the opposite of what are used to fight inflation.
That may be true but the tools have practical limits when fighting deflation.

To fight inflation the Fed can increase the cost of money (interest rates) an unlimited amount. To fight deflation the Fed can only lower the cost of money to 0%.

To fight inflation the Fed can increase reserve and margin requirements to curtail lending all the way to 100%. To fight deflation, the Fed can increase reserves and lower reserve and margin requirements but they are powerless to make people borrow or lend.
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Old 03-05-2009, 08:40 PM   #19
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$50 for a pair of Lucky Brand jeans?.....wow!! I'm glad I buy my Lucky Brands at Goodwill. I just bought me two pairs and one Gap at $5 each.

Whatever we are having/or will have is affecting me little as I have prepared for such a time like this(you have to when you were born in a country like Argentina and lived through 5000% inflation). I'm still not "feeling" it. I will need to see alot of looting, express kidnappings, being held up at gun point while unloading your groceries from your car etc. We are not yet there gang....let's hope we don't venture into such scenario.
this is the USA, why would i buy used clothes unless i was a hipster? my wife does resell the baby clothes.
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Old 03-05-2009, 08:41 PM   #20
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That may be true but the tools have practical limits when fighting deflation.

To fight inflation the Fed can increase the cost of money (interest rates) an unlimited amount. To fight deflation the Fed can only lower the cost of money to 0%.

To fight inflation the Fed can increase reserve and margin requirements to curtail lending all the way to 100%. To fight deflation, the Fed can increase reserves and lower reserve and margin requirements but they are powerless to make people borrow or lend.
you can also buy up debt creating more demand for it to increase lending, like the TALF
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