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alstry (35.03)

DEFLATION Nation!!!!!!!

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January 18, 2009 – Comments (8)

COLUMBUS -- The state has asked workers in its largest labor union to accept a 5 percent across-the-board pay cut, a shorter work week and unpaid holidays to help balance the state's troubled budget, according to a document obtained by The Plain Dealer.

The list of cuts and changes Gov. Ted Strickland's administration has asked the workers to accept, which also includes mandatory furloughs and paying more for their health insurance, would amount to $250 million in concessions, according to a members-only e-mail from Ohio Civil Service Employees Association president Eddie L. Parks.

http://blog.cleveland.com/openers/2009/01/state_employees_stunned_by_req.html

Paycuts are now pouring in from everywhere.....and some CAPS Fools are saying Inflation?????

Whatever your income is right now.....are you prepared to live on half of it in the next five years???

 

Prepare....Don't Fear!!!!!

Alstrynomics is giving you the appropriate heads up......

8 Comments – Post Your Own

#1) On January 18, 2009 at 3:15 PM, leohaas (35.73) wrote:

You are making a good argument, but your math is off. A 5% pay cut now does not require us to prepare to live on half of our incomes in 5 years.

And besides that, deflationary periods typically do not last 5 years. Tell us, what is going to happen with all the money our government has been printing for our these bailouts, stimulus packages, or whatever they call it?

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#2) On January 18, 2009 at 3:58 PM, BradAllenton (31.38) wrote:

There really is no debate to be had. Deflation comes in from time to time for a very short period and then gets chased out by a flood of paper. I like deflation and I hope it goes on for a bit, but it won't. All historical data shows that deflation gives way to inflation time and time again. Deflation is a temporary phenomenon, period the end.

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#3) On January 18, 2009 at 4:16 PM, mgiv (99.35) wrote:

You are assuming that inflation is demand driven.  Yes increased demand causes higher prices but.  When I use the word inflation I'm talking about money supply changes that devalue money.  I think we are all deluding ourselves if we think we can replace a void of money with increased lending - the lending must perpetuate in order for the money to exist and to fill a void we must lend at ever increasing rates.  Now add the fact that money is truly destroyed in assets that fell in value, how does a fractional reserve system deal with money that vanishes?  Lend lend lend.  But in order to balance the books, we will have to expand the money supply with no debt attached.  So I feel demand is just smoke and mirrors and if we remember the 70's demand and growth floundered and we still had inflation.  This is why they called it stagflation.

Also I believe that the desire for a fast recovery means we will most likely overshoot the required stimulus to achieve stability faster.  The question isn't what happens on the backside of a credit bubble, it's what happens afterward given all the stimulus to minimize the negative impact.

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#4) On January 18, 2009 at 5:56 PM, alstry (35.03) wrote:

Leo,

Actually your math is off a bit...

It is a five percent pay cut PLUS a shorter work week PLUS unpaid holidays PLUS paying more for health insurance.....

If you run it out....a 50% paycut in five years may be generous.  Think about all the people getting fired who are receiving 100% paycuts.

As far as the "printing" government is doing.....you guys still don't get it.....but you will.

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#5) On January 18, 2009 at 5:59 PM, TMFHousel (93.98) wrote:

BradAllenton,

"All historical data shows that deflation gives way to inflation time and time again. Deflation is a temporary phenomenon, period the end."

 

Just curious: You ever been to Japan? :)  

 

 

 

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#6) On January 18, 2009 at 6:47 PM, amassafortune (29.67) wrote:

Ohio has a constitutional requirement to balance the budget each year so they can't borrow billions like California to maintain the status quo while tax revenues sink. With unemployment near 8%, revenues need to adjust quickly. Ohio has a $1.8 billion rainy day fund that will also be consumed over the next couple years as a buffer to the necessary cutbacks. 

If I a were a state worker in Ohio with 5,10, or 15 years earned toward a defined retirement plan, the 5% cut looks a whole lot better than losing the job and time earned toward retirement. I would also consider that my health insurance contribution has not increased like it has in the private sector and the concessions would only partly put me in line with changes that have already happened in the marketplace.  

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#7) On January 18, 2009 at 7:12 PM, alstry (35.03) wrote:

The issue with DeflationNation.......is that it is not just Ohio, or California....but almost every state in the nation.

Jobs being lost by the hundreds of thousands, retailers closing down affecting tens of millions of square feet of retail space, tax revenues evaporating, the regional banks next in line for the crash.

Just look around, money is drying up everywhere....except of course if you are a money center bank. 

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#8) On January 19, 2009 at 2:13 AM, BradAllenton (31.38) wrote:

TMFHousel, I figured we were talking U.S. but even in Japans case of years of deflation it will pass and yield to inflation. I still like deflation, I have money that I have saved for many years. I would love for that money to have even larger power. I'm just not dumb enough to think that U.S. deflation will last for more than 2-5yrs. The tap is on full bore and it will destroy our money. We will have a new dollar at some point in the next 10yrs. 

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