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Comment by gte910h | Hacker News Reader

Cause that's really dangerous when you're suffering deflation....you know, when you take actions to correct this situation.

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dangerous only for the banks.

Howso? You mean the owners of the fed/risk? I'd honestly say any additional risk from this purchase is counterbalanced in the reduced risk in their other holdings.

Deflation is dangerous only for the entities that own large amounts of real estate/stocks. For normal people, deflation allows their buying power to increase. The government printing is akin to stealing from your labor right then and there.

Deflation allows personal buying power to increase holding income constant. Deflation is defined as a decrease in prices. You know what else counts as a price? The price of labor. I.e., wages. Average wages decreases under deflation, just like any other price. Deflation is not a magical money machine that makes us all richer.

1.) The US wage stagnation/decline for the last 10-15 years has been caused by globalization of labor/emergence of China/India. It is not a recent phenomenon.

2.) If you think government printing money will increase/steady your wage, look no further then the last bailout/printing. The banks/shareholders got all the money. You got lost wages and lost jobs.

On a side note, man, there's alot of sheeples on this board. Do you all like get up early in the morning to go to work and get robbed?

You're getting downmodded because you're expressing views on economics that are so far off that they "aren't even wrong", and doing them in a way that implies you're smarter than everyone else.

Please, then tell me why my arguments are wrong. Don't be offended just because you're one of those sheeples that go to work every day that have to withstand long commute and increasing workloads, so that you can be effectively taxed at 70% after inflation.

To start with, noone in the US is taxed at 70%. That's the "wrong" part.

Second, inflation doesn't even come into play with your tax bill, except maybe in a very tiny way in between withholding and tax day. And that inflation figure is currently about zero. So "taxed at X% after inflation" is meaningless. That's the "Not even wrong" part.

Not to mention the use of the word "sheeple".

[edit: just realized I agree with jbooth on something. I don't know if that's ever happened before.]

Yeah, that really doesn't help any argument.

Protip: When everyone else is crazy, re-evaluate the possibility that you're the crazy one :)

I could be crazy :) I am sitting in a coffeeshop relaxing and spending money from my income-generating business, while I watch worker drones go to work with scowls on their face, awaiting to be blamed for failing profits at their company.

Oh and if you think inflation is near 0%, you're not as smart as I thought you were ;)

But the real average wage adjusted for inflation has decreased for a long time. Deflation has in fact happened in labor cost. Now it's the time to bring the rest in line. It's unsustainable to have ever increasing asset price but lower labor cost. No one can afford to buy them at the end.

But the real average wage adjusted for inflation has decreased for a long time.

Is this really true? If you blindly apply inflation calculators to wage statistics, you get this result.

But on the other hand, people earning average wages live a much better life (in terms of goods/services consumed) than people in the past. Even the present day poor live what would have been called a "middle class" lifestyle in the 70's.

Something doesn't add up. Can anyone shed light on this?

1.) You're (like most people on this board) are confusing technology gains with monetary phenomenons.

2.) We went from a mainly single-income family in the 70s to dual-income family today. Notice how most household today goes to hell if even one parent is laid off.

Inflation is a rise in price levels relative to currency. I.e., $1 today should be able to buy $1 / inflation factor in the past. However, people buy more today with wages x inflation factor than the previously bought with supposedly a higher level of wages. That shouldn't happen.

No matter how you cut it, that's a problem with the numbers.

Regarding point 2), we also work considerably less than we did in the past. Hours worked per capita have not gone up significantly.

Your premise seems to be that deflation will affect labor cost less than other prices, thus bringing them into "line".

It's pretty obvious that average income has decreased at a greater clip that CPI (see all those people have their income set to 0?) so I don't see how this is a valid premise.

True, it allows people to buy more tomorrow with the money they have today. So what happens? They don't spend the money today waiting for tomorrow. But then tomorrow they realise that if they wait a little longer they'd spend even less.

The end result is that nobody spends for anything that is not absolutely necessary. Hence most companies have an excess of supply: they fire people, and discount they current production.

Now that more people are out of a job and therefore can't spend much, and the discounts have driven inflation even deeper, even less people spend their money.

It's a vicious cycle. It's what's happened to Japan for the last decade, and it's not a pretty place to be in.

Yes, and we are going to have economic correction regardless of whether the government print or not. Printing just makes the correction even greater and the suffering more pronounced.

I am not arguing that a correction is not needed. Is the speed with which you do it that creates problems.

So no printing (let the market correct itself) or printing (let the government siphon off taxpayer money to rich, pretend it's for the good of people)

oh, no, we're paying less for things. help!

the massive housing bubble and it inflationary effects HAD to collapse. those who waited out the insanity deserve lower prices. those who were foolish do not deserve to have the rest of us prop up their property values, although our government is foolishly backing every bad bet out there.

I'd like to say thank you, stretchwithme, for all of us who saved enough to buy a house, responsibly, in what just happened to be the middle of last decade and now have cause to sell (moving jobs because the economy stinks). We so deserve to seriously be screwed over because of our timing. Thank you US government. Thank you stretchwithme, your sentiments help the situation tremendously.

Surprisingly, there were actually many people who bought a house in 2003-2005 because they had a down payment at that time and they had jobs and they bought what they could afford.

Should we feel sorry for you because you don't have the patience to wait? Because you weren't smart enough to realize that maybe housing prices doubling in 1-2 years don't equate? Did someone make you buy a house at gunpoint?

> who saved enough to buy a house,

If you saved enough to buy a house then live in your house.

If you're moving around then don't buy houses. They are places to live. Your problem is that you want them to be investment vehicles to increase your wealth. Well, if they are investment vehicles then you also have to accept that you will make a bad bet and will lose in value.

You want your cake and eat it too. It is like stock investors crying that Intel shares lost value. Well, then they shouldn't have invested in Intel, they should have put their money in a savings account.

You seem to think because you had a down payment, had a job, bought a house you could afford, you "deserve" to be screwed over less by a falling housing market, because you were "responsible".

Just the opposite! The migrant field worker who got a 0% down interest only loan on a 500K house is far less "deserving" of the screw than you, because he has no money to be screwed out of.

sorry, I didn't mean to be insensitive. you don't deserve this mess, but we own the risks we take on. There's simply no other way to run a society.

When the dot com bubble burst and I lost a lot of paper profits, that was unfortunate and unforeseen and I was responsible for the choices that got me there. It would have been nice if someone sent me a check for my losses, but how could the government do such a thing without making someone more responsible pay for my mistakes?

And we don't deserve to have our government doing this to us, again and again, but we own that until we make it clear that they should stop.

Its not China's responsibility or Saudi Arabia's. It ours.

Deflation also pushes people with large home mortgages closer to the brink, as their debt increases in value, and their banks feel pressure to lower their risk exposure by refusing to refinance or renew loans and pushing loan holders to pay down their debts. It has the potential of making the housing crisis much worse for everyone. That's not even getting into what it would do to the commercial real estate market, which is currently in a tailspin.

> Deflation also pushes people with large home mortgages closer to the brink ... > thas the potential of making the housing crisis much worse for everyone.

The housing "crisis" happened because people were getting large home mortgages. There shouldn't be people with large home mortgages. I interpret "large" here as bigger than they can chew. If they can't afford their home, they can't afford their home -- time to scale down to a small condo or start renting. Why are we proping up people with large home mortgages and rewarding their stupid buying decisions?

Because they were unfortunately quite common, and not propping them up would put a large portion of the population out on the street, and cause a further surplus of homes on the market, driving values down further in a vicious cycle. The point is they could afford their home when banks lent them money at reasonable rates, when the bank assumed they could always resell the home and get their money back, but when the current appraised value of the homes dropped, banks were left holding much riskier debt, and charging much higher rates to existing customers with variable-rate loans, as well as those due for renewal. This has trapped a huge number of homeowners. The situation is even more troublesome in commercial real estate, as loans are for relatively short periods, after which they must be renegotiated based on current value, against a backdrop of commercial leases for tenants rapidly dropping in many cities. It's the scale of the crisis on so many fronts which has such potential for devastation of the entire economy.

Deflation is bad for debt issuers. Guess who's holding the biggest amount of debt?

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