patrick.net

Seriously, no comments yet?

I was watching an old Dennis Miller comedy hour on HBO on the "on demand" and his answer to the national debt is whomever we owe the money to, don't pay them!

Darn i thought i had the first message

Jealous Bitter Renters are kewl

Envious Acrid Lessees is better

I don't understand the economy. How do you quantify "inflation"?

I mean everyday prices on electronics drop (i.e. for the same $ you get better stuff the longer you wait) so is that deflation?

If gas prices go up, is that inflation?

If home prices drop, is that deflation?

If wages rise, is that inflation?

If the dollar devalues, is that inflation?

How the hell you figure this crap out?

speaking of Stagflation, The other thing I never understood is what is a STAG party? is that like a bachelor party?

How the hell you figure this crap out?

For the same amount of money, if your living standard improves, _you_ see deflation, if your living standard deteriorates, _you_ see inflation.

It is a matter of perspective. However, if most people in the society see inflation, _we_ have inflation.

inflation
http://en.wikipedia.org/wiki/Inflation

deflation
http://en.wikipedia.org/wiki/Deflation

stagflation
http://en.wikipedia.org/wiki/Stagflation

stag parties
http://en.wikipedia.org/wiki/Stag_party

frank? Randy H? Bueller?

Hello Folks,

I am deeply curious about this, unfortunately I am a generation Y and do not have a practical life experience in a non-bubble or post bubble world. I also do not have an idea what types of things I should study to make an educated conclusion. So I am interested in hearing people's answers and justifications.

We had stock market bubble. Followed by RE bubble. Is there a bubble they could inflate to keep things going, or does it go into a period of inflation or deflation?

Since many local governments were able to pull in excessive tax receipts out of both bubbles (Cap. gains and property tax assessments) and are on the verge of bankruptcy with this high income, what would happen if there is no other revenue generating bubble to inflate?

Thanks for the Wikipedia links.

But that's a little lazy of an answer as Wiki doesn't help my core questions... You should take a more active role in answering my insightful questions....by the way can you also answer what's the difference between "economic growth" and inflation?

Aren't both just more money for everyone?

SL,

Well, inflation and deflation issues were throughly discussed a few threads back, see here http://patrick.net/wp/?p=199#comments

The questions you pose have pretty clear cut definitions, so it's better just to refer to pre-existing material rather than have someone re-type all the definitions here.

The general assumption is that most readers here has a cursory understanding of inflation, deflation, economic growth, etc. The purpose of this thread isn't to give definitions, but to discuss the implications of US fiscal policy, government policy, etc.

by the way can you also answer what’s the difference between “economic growth” and inflation?

Aren’t both just more money for everyone?

Inflation, when talked about in the context of something like an asset price bubble or the economic after effects is really referring to purchasing power. If inflation is balanced, that is prices increase at generally the same rate as wages grow (and if capital stock depreciation/replacement costs are also in line), then it has little effect on the economy. It just makes the numbers bigger. If I'm happy with rent of $1000/mo and salary is $50,000/yr then I should also be happy with rent of $2000/mo and salary of $100,000/yr, assuming everything else also doubles.

Economic growth is correlated to, not directly tied to inflation/deflation. Most times of economic growth come during inflationary periods, but they can happen during deflation too. Japan both grew and shrank at different points during their recent deflationary era.

All economic growth means is the rate of GDP growth (or shrinkage) from period to period. Theoretically, if GDP grows but the Fed doesn't' increase the money supply by enough, there will be deflation. In this way the Fed can slow down booms or reverse recessions (periods of negative GDP growth). There are many chapters of macroeconomics you need to read just to really get a decent intro, and there are lots of detailed complications to what I just said, but that's the basic picture.

You should take a more active role in answering my insightful questions

Huh? Perhaps you should check the Wiki for blog.

SL,

However, per your demand.

1. I mean everyday prices on electronics drop (i.e. for the same $ you get better stuff the longer you wait) so is that deflation?

That is deflation on the particular item. However, most electronics manufacturers constantly update their products and try to sell each generation at a similar price point but add additional features.

2. If gas prices go up, is that inflation?

That is inflation of gasoline prices. However, most people don't say inflation of particular items, they refer to inflation as a whole economic basket. Thus, if during this month, the deflation of electronics prices and inflation of gas price lead you to spend the same amount this month as last month, then as a basket, neither inflation nor deflation has occurred.

3. If home prices drop, is that deflation?

Yes, but once again, you've either missed the big picture or you're being intentionally obtuse.

4. If wages rise, is that inflation?

Wage rise can lead to inflationary pressures. On the demand side, people with more money can afford to buy more stuff, leading to greater demand and higher prices for the stuff. On the supply side, higher wages mean manufacturers have higher production cost, pressuring them to price stuff higher. However, this effect can be muffled when the stuff bought comes from abroad, at least in the short term.

5. If the dollar devalues, is that inflation?

Yes.

6. How the hell you figure this crap out?

See google, wikipedia, or read older threads on this blog. Consider buying a introductory book on modern economic theory. Take a Intro to Economics class and don't fall asleep during class. If none of these work, maybe you're just not cut out for understanding economics - take solace, some people are really bad at languages too.

I don’t understand the economy. How do you quantify “inflation”?
...How the hell you figure this crap out?

Forget all the definitions from Wikipedia, BLS (Bureau of Labor & Statistics --aka "BulLShit"), fancy GDP deflators, et al. Here's the true definition of inflation:

Price of anything regular people need goes up = not inflation
Price of anything regular people DON'T need goes up = inflation

Btw, thanks to astrid for creating this thread.

Price of anything regular people need goes up = not inflation
Price of anything regular people DON’T need goes up = inflation

I have a better definition:

Inflation is the constant, 2.0%.

"Since many local governments were able to pull in excessive tax receipts out of both bubbles (Cap. gains and property tax assessments) and are on the verge of bankruptcy with this high income, what would happen if there is no other revenue generating bubble to inflate?"

Yes, that is something that concerns many of us. Depression, dramatically higher taxes, lower government benefits, municipal bankruptcies, revolution, etc., have all been mentioned in the past. Hopefully more people will contribute their thoughts on the matter here.

HARM,

Excellent cutting out the crap answer! That one belongs in the bubble definition thread.

hate to rent:

Based on astrids answer, I Will review some of the older threads on this board. I am new here, but the initial thought that struck out at me on astrid's answer was:

Now I understand why the legislation wants to legalize the illegal aliens. Maybe they can give them a scaled back government job at a scaled back wage.

Now seeing your response also, perhaps the illegals will be able to bring outsourced or re-patriated jobs to USA... That'd be more tax receipts than the under the table madness that presently goes on and some of the government jobs and benefits could be filled at a lower wage.

smb_gaiden,

There are several lines of thought that can be used to justify legalizing illegal aliens. One is to provide a cheap, pliable labor force. Another is fairness to the illegals. Another is to fuel this country's population growth.

I don't personally buy any of these arguments. Quite simply, illegals aliens are ILLEGAL. They broke the law when they came into this country without being approved by the INS. I think the discussion should end there.

I don’t personally buy any of these arguments. Quite simply, illegals aliens are ILLEGAL. They broke the law when they came into this country without being approved by the INS. I think the discussion should end there.

I agree. Crime must not pay.

We should allow guess workers, but that is a different issue.

Hello!
Anyone seen this bay area-centric zillow-like site? It appears to be in beta test (duh it says "beta" on the top left).

movoto.com

They even have a "No Obligation Home Advice" clicky button. I'm tempted to email & ask if it's a good time to buy :)

Now for a wacky business idea,

McMansion Challenge 2012.

Set in a $100/barrel oil universe. A reality television show where RE vultures buy foreclosed McMansions and turn them into something productive. Our camera crews follow them as they gut McMansions and take out granite counters, break up two floor living rooms, and subdivide master bathrooms into bunk style housing.

The result? A functional boarding house for 40 rent paying Mexican guest workers.

I'm ok with "Guess" workers (people making those designer jeans), but not "guest" workers. :-P

I’m ok with “Guess” workers (people making those designer jeans), but not “guest” workers.

Even guest workers are fine, so long as they follow the rules and obey the laws.

Sorry --bad pun. I'm also ok with a limited number of guest workers under those conditions too AND provided their sole purpose for being here is not to provide businesses a dirt-cheap labor pool to replace perfectly qualified Americans.

provided their sole purpose for being here is not to provide businesses a dirt-cheap labor pool to replace perfectly qualified Americans.

Come on, HARM, global labor arbitrage will occur anyway. ;)

Frankly, I think they will just do things that Americans do not want to do:

1. Restroom attendants (we need more of them, even 5-stars hotels here do not have them, this is unacceptable)

2. Live-in maids

The list goes on...

"2. Live-in maids"

Can we beat them like the Saudis do?

Can we beat them like the Saudis do?

Huh? Bad karma on them.

SJ_Jim,

Thanks for the movoto link. It seems a lot easier to use compared to other RE websites.

Peter P,

Just illustrating how guest worker programs almost inevitably lead to abuse of those workers.

Just illustrating how guest worker programs almost inevitably lead to abuse of those workers.

The karma police will get those people eventually.

For your consideration:

http://www.nytimes.com/yr/mo/day/business/retirement

New York Times special coverage of retirement.

Damn, is the inflation discussion over already? 2% eh?

smb_gaiden,

Also, don't be intimidated by some of the economics jargon and concepts. They're introductions to a whole specialize way of thinking about the world, so they take a little time to get used to. Just stay at it and don't be afraid to ask questions, people here are usually generous with their knowledge.

(I was a snippy to SoftestLanding because (a) he's been here for a while so he should know better and (b) he was just using this blog as his general education tutor).

I find basic economic knowledge to be a very empowering decision making tool and to be very useful for explaining how the world works.

Damn, is the inflation discussion over already? 2% eh?

Of course. Inflation can be safely _defined_ as 2% because

1. it is contained even though "resource utilization" is high
2. economic growth is solid

Don't worry, be happy, buy 6 condos and get a toaster free!

NOT INVESTMENT ADVICE

"Damn, is the inflation discussion over already? 2% eh?"

Peter P is probably in favor of a planned economy.

"Don’t worry, be happy, buy 6 condos and get a toaster free!"

And don't forget economic substitutes. You don't have to eat foie gras, duck liver is just as good! :P