What is deflation and what does it mean for you? - MoneyWeek Videos
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- Опубликовано: 28 авг 2024
- There's a lot of talk about potential deflation at the moment, especially in the Eurozone.
If deflation does happen, it could bring the current economic recovery to a halt and also hit share prices.
In this video, we look at what deflation actually is, the chances of it happening and how it would affect you.
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Deflation is only bad news for people who are in debt, because they are in too much debt. Assets are currently overvalued since people have borrowed too much money to buy them. The deflation is the consequence of this excessive debt. The deflation will punish the people who borrowed to consume in the present at the expense of the future. Cutting interest rates is only encouraging people to go into more debt to keep the asset price bubble from deflating. Central banks, by suppressing interest rates, have engineered a wealth transfer from the young & poor to the old & rich. We need this deflation to restore the balance to the system.
Liquidity trap is a theory that is inconsistent with reality and is used to explain away flaws in the money-multiplier-model. The quantity of funds held by financial institutions at the central bank is used only to make day-to-day payments between member banks of the central banking cartel. Increasing these funds through quantitative easing only adds incentive to issue margin debt to buy shares. The effect of the modern central banking cartel system with price-fixed interest rates is to remove the need to hold a % reserve ratio (the CB removes risk of bank runs). Lending is only constrained by a) interest rates and b) capital adequacy ratios.
All this fear mongering about deflation is a scam to trick everyone into continuing policies which transfer wealth from the poor &young to the rich &old. People without assets, who have worked and saved and lived within their means (i.e. not gone into debt) are being punished by the current low interest rate environment. Deflation is needed to reward the behaviour of individuals who produce a surplus in excess of their consumption levels, i.e saving for investment.
The greatest economic fiction of modern era is the consumer-based economy. Such a stupid idea. As if we could all get rich simply by borrowing & spending money. And all that we need is a government that is willing to print/lend the money to spend.
Deflation is the tail that wags the dog for the people who push this theory and they claim that price deflation causes depression. Debt is the dog's brain and the true cause. Japan is the poster child for how depressing rates and QE doesn't work. When debts are too high they need to be reduced, either in nominal terms through liquidation (deflation) OR in real terms by the government running a deficit financed by central banks purchasing bonds directly from the treasury (inflation). What has been happening since Greenspan in 1987 and every crash since is central banks cut interest rates and people go into more debt, transferring more wealth upwards.
Deflation is prosperity. The fear Deflation because you can not tax it like Inflation.
The problem is that all of us, even those who haven't racked up excessive personal debt, are in quite a lot of debt. Why? Because we all owe a lot of taxes in the form of government debt. When deflation kicks in, the real value of government debt will surge, leaving us all stranded.
At the year 2013 was discovered The Progressive Growth of Money Supply Principle, which say you how much the Money Supply must growth, i.e., the quantity of money that markets needs: ruclips.net/video/iiKr-i022mY/видео.html Once the Fractional Reserve Banking is forbidden, if the Central Bank increases the money supply by an amount equal to the sum of interest generated by the financial system during the preceding period, the market interest rate will be the natural interest (Wicksell) and we won't have bubbles (tulips, gold, stocks, etc.) and crisis. Thanks to the Progressive Growth of the Money Supply Principle we know today that it is impossible to return to the Gold Standard. The Principle will force Central Banks to change de monetary policies. To control inflation/deflation we need to control de Money Supply.
Quite funny how the world changes fast. In 2014 it was unthinkable that interest rates could be negative, as the man says at 4:44: "If you can't cut interest rates any lower, below 0 percent.."
Very interesting video and more relevant than ever! People are worrying about inflation but deflation is on the loom.
When entire economy is based on debt (like US) then it's no surprise that deflation is bad. I think, sound economy should be based on savings and in such case, deflation would be good, because people's savings would be gaining value over time. Am I wrong?
It depends. A long period of deflation woul stagnate the jobs market because the companies would find it difficult to invest in something new or to produce more goods, acquire more debt etc. For persons it depends, if you own a coffe bar then it will be bad for you because at least for example you will need to pay the rent for the same price for at least 6 months but the decrease in price of the goods you are selling are monthly or weekly. People savings would be gaining value that is correct but they are not going to invest it anytime soon.. So the economy stagsnates as I told you. Pretty much the problem Japan has.
At the very HEART of the problem. Down deep it's this..... Children go to school in Russia and learn to be good communists. Children go to school in the West and USA in particular, and....... Learn to be good communists.
Deflation is good because your money are not losing value. If you have savings, they will get more valuable and you will be able to buy more things later. So people would actually be buying goods and making investments to acquire more money. If deflation continues forever you buy the things you need and want anyway!
In times of inflation people are afraid of their money's losing value. So they buy precious metals or other valuable stuff to preserve their savings. People will just not be saving money but other things. But generally they will have savings anyway just in different form. Only in case of hyper-inflation they would start buying food to protect themselves and they would spend all money because they would have no value.
+JK JK yes, right. i agree. i deleted the last part
How about a big glass of deflation!
The Brits are so good at explaining things. I understood this so well.
This video is very informative and accessible, many thanks for sharing your views. On the issue of whether deflation affects consumption, it would be interesting to study the effect across several industries. For instance, though the need for a new computer may override the impetus to wait for the price to fall, would the same be true of a new automobile? There are dozens of industries which may be affected differently by deflation, and in general a deeper look is necessary. -Ali
Video is retarded as it tells you that it's bullets fault for getting stuck in someone's head. There is no other way to put the claim that inflation is bad.
Regarding Japan: if low rates and more QE is good for stock markets, why is Japan's Market still down after more than a decade?
The level of cognitive dissonance in this video is staggering. Saying that deflation is bad is like saying that if you shoot someone it's the bullet's fault for killing them...
great post
Is it more likely now?June 2022? What’s next, Hyper inflation?
deflation is bad, why? less money in circulation -> less transaction (less buying) -> low consumers spending -> excessive manufacturing goods and services will be reduced by businesses -> layoff -> unemployment up -> no income/money to spend -> lower consumers spending -> and repeat.
Transaction remains same
Very poor explanation.
The first examples about debt (private and company) are not the same problem in real world, because in both examples total asset value is always greater than debt value (thats the way loans work), and the advantages of deflation outweigh the disadvantage.
However, deflation is a major problem for government debt, because government have debt massively bigger than assets. So government benefits from inflation for the same reason. All they have to do is to brainwash the people (who suffer with inflation) that inflation is better that deflation.
How can debt grow?? how it can reduce consumption??
It is the real value of debt that grow due to increase in money value ..but how can deflation reduce consumption maybe because people start saving their money
Deflation is great for an economy at -0.1-3.0% rate....you have a stronger currency which is great !
Deflation incentivizes people to save... How outrageous, we can't have that!!..
Zyzyzx Zyzer The hell are you talking about clown?
QE is good for the stock market?yeah, that is until the bubble busts.