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Deflation Rearing its Ugly Head Around the Globe


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2014 Nov 14, 12:55am   48,905 views  155 comments

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According to the latest figures, deflation is now perched on China’s doorstep.

In September, China’s consumer price index was up 1.6%, but its producer price index fell 1.8%. The CPI increase was its lowest since 2010.

Economic growth is also receding. It’s hard to pinpoint the exact figures, because Chinese economic data is notoriously sketchy. But in September, demand for electric power, a “bellwether for China economic activity,” fell 8.4% from the prior month, the second straight monthly decline.

“Deflation is the real risk in China,” stated the chief economist at a Hong Kong bank.

http://www.globaldeflationnews.com/deflation-rearing-its-ugly-head-in-subtle-and-not-so-subtle-ways-around-the-globe/

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147   Heraclitusstudent   2014 Nov 19, 8:46am  

indigenous says

It is not lack of demand it is a lack of production. Keynesian myth # 2842

Meeting end-demand is the goal of all production.

More like an obvious fact.

Otherwise we would pay people to dig holes with a spoon and other people to fill them with a fork.

148   indigenous   2014 Nov 19, 8:49am  

Heraclitusstudent says

More like an obvious fact.

You would think so...

149   curious2   2014 Nov 19, 8:49am  

Heraclitusstudent says

Otherwise we would pay people to dig holes with a spoon and other people to fill them with a fork.

Currently, we pay agribusiness to fatten people with corn syrup, then pay the medical industrial complex to manage the resulting diabetes. It "creates jobs," or so we are told, as people get fatter and sicker. (Conversely, actually curing or preventing diseases would eliminate jobs, so instead we convert diseases into chronic revenue models.) While productivity gains in other sectors (e.g. tech) cause prices to fall, we can count on the medical insurance sector to produce inflation every year, as legislation written to maximize revenues puts new technology to work for that purpose.

150   Heraclitusstudent   2014 Nov 19, 8:55am  

curious2 says

Currently, we pay agribusiness to fatten people with corn syrup, then pay the medical industrial complex to treat the resulting diabetes. It "creates jobs," or so we are told, as people get fatter and sicker.

Yes they also lend to people without checking their ids, and then sell you "identity theft protection". They create problems and charge you for the solution.

That's an interesting point but I'm not sure it addresses what was discussed:
- If demand slows, production slows, employment is down.
- If employment is down, demand slows.

151   curious2   2014 Nov 19, 9:01am  

Heraclitusstudent says

That's an interesting point but I'm not sure it addresses what was discussed

You're right, it was just a thought after your spoons and fork. I already addressed the OP topic, and a spurious claim about employment. Tying the two together, I would point out that GDP and other macroeconomic measures (including CPI) were developed for the purpose of generating objective data that could inform policy choices. Alas, these indicators have become fetishized at the behest of certain industries. As your spoon & fork metaphor showed, increasing "employment" does not necessarily result in value (or greater overall utility), and the medical sector amplifies that point by producing many examples of people who are objectively worse off because they produce more demand and employment. The FIRE sector mouthpieces want inflation, so they love perennial inflation in the medical insurance sector and hate deflation driven by productivity gains in other sectors.

152   Heraclitusstudent   2014 Nov 19, 10:21am  

I still think the goal of economic activity is to fill the needs.
It so happens that industries that are not exposed to international competition have been disproportionately inflated compared to those that are. Sometime with the complicity of authorities. Still we are not down to my spoon and forks example.

The fault of keynesians is to assume you can compensate a persistent problem caused by globalization: low wages, with a solution which was always meant to be temporary by nature: debt. End demand may indeed be the problem in the US, but in the long term it can only come from wages.

Plus anyway if you really want international trade, you have to deal with nations saving half of what they take in (China). If this wasn't the case, the issue wouldn't be so bad.

153   tatupu70   2014 Nov 19, 10:35am  

Heraclitusstudent says

The fault of keynesians is to assume you can compensate a persistent problem caused by globalization: low wages, with a solution which was always meant to be temporary by nature: debt. End demand may indeed be the problem in the US, but in the long term it can only come from wages.

Is that what Keynesians believe? I think that's what our politicians have foisted upon us because they AREN'T actually Keynesians at all.

154   Heraclitusstudent   2014 Nov 19, 10:37am  

tatupu70 says

Is that what Keynesians believe? I think that's what our politicians have foisted upon us because they AREN'T actually Keynesians at all.

Definitions.
What matters is how Keynes ideas are translated in the real world.

155   tatupu70   2014 Nov 19, 10:47am  

Heraclitusstudent says

What matters is how Keynes ideas are translated in the real world.

I understand what you're saying, but it seems wrong to call it Keynesian as it's not at all what Keynes advocated.

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