Quote Originally Posted by Rajiv View Post
TPC

I really don't thonk that this belongs in "Junk Economics" even though you put it here to make a point. There was a good guest post at TAE today on deflation. I am linking to the original blogpost - Deflation and You: A Guide to Understanding this Peculiar Economic Model

I am posting all of it, as it is extremely clear and good, and needs to be read along with EJ's latest.
You know Rajiv/TPC, i keep looking at this and one side of me wants to believe this viewpoint but the other side just doesnt understand why people think that people saving money or spending/not spending has anything to do with inflation/deflation.... If you travel outside the US you will see plenty of examples where people save money, don't use credit or whatever and inflation still rages on, examples, Argentina, China (where i believe i read that inflation is ~8%), Egypt...

One example i am intimately familiar with is Egypt since i go there every couple of years... Acknowledged Inflation is ~18%/anum... Every two years i go and while there, i buy Egyptian cotton undies They damn near double in price every time i go.... A beggar will practically spit in your face if you attempt to give him 1 Egyptian pound, it is now up to about 5 for the beggar... Almost everything is more expensive there every time i go, people still save, but they would laugh at you if you asked if they held savings in Egyptian pounds, almost all families own some form of gold, or dollars....

In my mind, inflation and jobs/employment/personal consumption/spending are not tied at the hip...... Too many examples to disprove that theory... If lending doesnt free up then leveraged assets will go down (housing), but IF the dollar tanks, then imports become more expensive and thus input costs increase, while local products/services can be sold cheaply...