Nightmare scenario: U.S. deflation risks rising

[Dakine10 5,452]

The only people that this is holding back are the people that helped create the bubble in the first place - investors/"flippers"

For your average person who wants a new home, they are either going to purchase one or not.

Most people don't stop and think "oh, the value might continue to go down a little bit." - Most just want a new home for their family to live in instead of an apartment, or something smaller that doesn't fit their needs anymore.

Deflation is bad for anyone who has debt, and great for anyone who has savings. Americans on average have more debt than any other country at any time in history.

I agree deflation of wages and prices can be good thing in theory. Unfortunately existing debt will not deflate, and that makes deflation a bad thing for a country that basically rewrote the definition of debt.

Anyway, as long as the fed can print money at will, there's no point discussing deflation in anything more than theoretical terms. It just can't happen in that scenario.

Edited October 27, 2011 by Dakine10

[james&olya 1,121]

despite the rhetoric, deflation is a good thing.

Are you serious? Do you have any idea how modern economies react to deflation?

[Póg mo 1,749]

I highly doubt deflation will become a serious problem anytime soon, and honestly without a massive change of policy by the US government and the federal reserve the chances of it happening are very, very low. Something similar to what happened to the German economy in the 1930s is far more likely in my opinion.

[james&olya 1,121]

I highly doubt deflation will become a serious problem anytime soon, and honestly without a massive change of policy by the US government and the federal reserve the chances of it happening are very, very low. Something similar to what happened to the German economy in the 1930s is far more likely in my opinion.

I agree. While it doesn't often seem like it, I think that the 'adults' still tend to be in charge where it matters to prevent deflation from occurring. The danger is still there if one of the truly whacko right-winger candidates were to get nominated and actually win the presidency. (or the vice-presidency with the president having a bad heart!)

Edited October 28, 2011 by james&olya

[Obama 2012 1,714]

Are you serious? Do you have any idea how modern economies react to deflation?

aware how they react, and it's ignorance that causes it to act that way.

Wall Street is a BIG part of the problem there, as with anything else now days.