Deflation is only fair
I am not sure if government keeps statistics of average pay per hour. But on the basis of anecdotal evidence at least, unemployed people are finding jobs at less pay. That is to be expected after all with such high unemployment. Bonuses are also cut because companies have an excuse of bad economy. This is supply and demand at work .Now, let’s assume that we have 3-5% wage deflation a year. On top of it we got FED which prints money to induce inflation in deflationary environment because to the FED deflation is worse than the devil reborn. For the FED deflation is worse of all evils.What an average Joe got as a result – 6-8% loss of purchasing power. On top of it there is consumer credit contraction. Average Joe is squeezed, no doubt about it.
In a free market, as salaries fall the demand for goods should fall, the prices for goods should fall, thus softening the blow for an average consumer. That is a proper and fair way to deal with salary deflation. Now comes a whole bunch of economists who tell us that deflation cannot be allowed, deflation will lead for sure to an economic collapse.Remember, that these economists define deflation in terms of pricing, not money supply. They cannot allow fall in prices, they have to keep inflation expectations alive to keep the bubble going. But the bubble is bursting because the population that feeds the bubble is already squeezed. Deflation is only fair and free market way to deal with bursting bubble. FED is standing on the trucks in front of the charging deflation train. FED has the full support and faith of the US government and therefore all of the US and allies resources behind it. And that is not something to take lightly. I guess, the ultimate outcome will depend on the speed of the said deflation train.
It amazes me however that the same economists that usually preach free market, right here and now are trying to stand against the same free market and they believe they can overrule it. If memory serves me correctly, in the past free market won each time sooner or later. Fascinating.
As an average Joe, I wouldn’t feel very charitable towards the government or their economists right now. All I know, I lost 10% of my purchasing power though I am not sure how exactly that happened. The government has been promising for things to get better for 2 years now, why should I believe them, why should I believe they know any better than my common sense does. And common sense tells me to cut down on spending and save and work hard. Only my saving are being stolen through inflation. Now tell me why deflation is bad, I think deflation is only fair in the current situation and inflation is outright stealing.