The Crash is past. Comes now Inflation. | 60 comments (60 topical, editorial, 0 hidden)

Re: The Crash is past. Comes now Inflation. (4.00 / 3)

The Federal Reserve's rescue has failed - Telegraph

The verdict is in. The Fed's emergency rate cuts in January have failed to halt the downward spiral towards a full-blown debt deflation. Much more drastic action will be needed.
Yields on two-year US Treasuries plummeted to 1.63pc on Friday in a flight to safety, foretelling financial winter.
The debt markets are freezing ever deeper, a full eight months into the crunch. Contagion is spreading into the safest pockets of the US credit universe.

Any idiot can face a crisis - it's day to day living that wears you out.

by ceebs (ceebs (at) eurotrib (dot) com) on Mon Mar 3rd, 2008 at 11:11:55 AM EST

Re: The Crash is past. Comes now Inflation. (4.00 / 2)

So the problem is debt deflation, not inflation.

Granted, any attempt to rescue the credit system for the benefit of the "real" economy will make good on some (most?) of the speculative (hence inflationary?) asset bubble of the past five years, but I believe that is necessary.

A "Second New Deal" would ensure that measures are put in place to ensure the impact of inflation on the working poor, who had no part in causing this problem, is minimized, and that those responsible for the financial asset bubble pay the cost of that social support.

We have met the enemy, and he is us — Pogo

by Migeru (migeru at eurotrib dot com) on Wed Mar 5th, 2008 at 06:25:56 AM EST
[ Parent ]

Isn't that just two sides of the same coin? (none / 0)

Debt deflation is the problem for the financial markets; inflation is the penalty for us proles.

I second your "Second New Deal" idea, though I prefer Chris' revolution.

Related remark - John Williams (shadowstats) predicted this past year's performance in December, 2006. I wrote to him the other day, trying to gauge any interest in co-ops or re-regulation. He's a sort-of libertarian, but he said that such approaches sound interesting to him now - except that it's too late. Stagflation = death this time - no way out.

Robert Reich has been preaching higher taxes on the rich and earned-income-credit for the poor lately. Sounds OK to me, too.

paul spencer

by paul spencer (spencerinthegorge AT yahoo DOT com) on Wed Mar 5th, 2008 at 04:34:12 PM EST
[ Parent ]

Re: Isn't that just two sides of the same coin? (none / 0)

Well, the problem with debt deflation is that it kills credit and this kills the "real" economy. So it is "our" problem, too, even if indirectly.

I don't see why there would have to be no way out of stagflation this time around.

We have met the enemy, and he is us — Pogo

by Migeru (migeru at eurotrib dot com) on Wed Mar 5th, 2008 at 04:43:39 PM EST
[ Parent ]

Agreed completely. (none / 0)

My point was not comprehensive; it was just looking at the immediate relationships. It's almost always "us" that face the problems ultimately.

As to John Williams' comment, I was just musing. Actually, I was amused that he would entertain the idea of co-ops or regulation, given his basic philosophy. Then he was sort-of emphatic that we were submerged in quick-shit. No, I don't agree with him about the future - just the present.

paul spencer

by paul spencer (spencerinthegorge AT yahoo DOT com) on Wed Mar 5th, 2008 at 07:20:49 PM EST
[ Parent ]

The Crash is past. Comes now Inflation. | 60 comments (60 topical, 0 editorial, 0 hidden)

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