Deflationistas Bemoan the End of the World
It is going to be a long couple months ahead as the deflationistas cry and moan that we are doomed, the end is nigh OH GOD IT'S ALL OVER if the consumer sits around waiting for prices to fall. I hate to break it to our little deflating friends but, uh, if the consumer has nothing, less than nothing is still nothing. Simple math, stick with me here people.
William Greider writes in The Nation (via NPR):
In short, we may be witnessing the opening of an authentic economic debate — one that truly addresses the nation's historic predicament. Let's hope. The terrible trap of deflation gripped Japan for nearly fifteen years after its financial collapse in 1989. Japan's economy struggled to restart, but repeatedly fell back into recession. That is one definition of Depression — an economy that cannot get out of the ditch.And why is that? For the 15,000th time: because in a system of perpetual debt, only inflation (even the nice soft gentle sort of financial assraping we accept year after year whereupon $1 today will buy you 95 cents a year from now) can sustain the system. If we fall into the deflationary spiral that haunts idiots like Paul Krugman in his nightmares, the game is over, the curtain is drawn and the fraud is forced out onto the stage in all its naked glory. Get it? Over. Done.
Deflation essentially tells everyone to hunker down and wait. Instead of buying big-ticket items, consumers wait for prices to fall further. Instead of investing in new production, companies wait for cheaper opportunities, cheaper labor. The paralysis feeds on itself, once it gets started.
Actually, our situation is more dangerous than Japan's was. The Japanese culture and its economic system are shaped by a functioning commitment to social solidarity that does not exist in the United States. In its worst years, Japan's unemployment rate never rose much above 5 percent. Protective cultural values, embedded in the economic system, would not tolerate it.
The American system, by contrast, readily throws people over the side in the name of free-market efficiency. The pain is distributed first to the weak and defenseless, as we now witness, but the losses creep upward on the social ladder as the recession continues. Deflation would generate the pain more widely, more ferociously.
This has nothing to do with the moral fortitude of the fine people of Japan versus our own, nor does it have much to do with employment at this point. There is simply no exit, no strategy and no solution but devaluation. The parasite devours the host until the host has nothing left to give and must then devour itself.
Unless one of you geniuses has an idea for a way out of this... ?
Meanwhile all I see is a whole lot of desperation... where are my desperationistas?