Japan's deflation continues as prices fall

[pampango]

Source: BBC

Japanese consumer prices fell for the 20th month in a row in October, further evidence that the government is struggling to combat the deflation that is undermining economic recovery. The core consumer price index fell by 0.6% compared with a year earlier, official figures showed. This was a slight improvement on the 1.1% price falls seen in September.

Deflation is particularly damaging to economic growth as consumers delay purchases until prices fall further.

Japan is also struggling with a strong yen, which makes exports more expensive to overseas consumers. Figures released on Thursday showed export growth slowing for the eighth month in a row, with exports to Europe falling for first time for almost a year.

Later on Friday, Japan's parliament will vote on a new $61bn (£39bn) stimulus plan to try to boost the flagging economy. Ministers have struggled so far to get the new stimulus through parliament, with opposition parties using blocking tactics against the extra spending required.

Read more: http://www.bbc.co.uk/news/business-11844483

[madrchsod]

1. they went through the same thing in the 80`s or 90`s...

[Fool Count]

2. What a refreshing idea - people not buying crap they don't need.

Even if that's just because that crap is getting cheaper by the day, still a hopeful sign for the planet Earth.

[Lucky Luciano]

3. Deflation also means people's homes go down in value along with their wages.

It is a very bad thing.

[Fool Count]

22. So? I don't see a down side yet. More affordable housing is a "very bad thing"?

Maybe if people's homes go down in value, people won't be buying homes they don't need,
and those who do need them can buy those homes cheaper, all at the expense of mortgaging
their life's earning at the altar of "home ownership", which is nothing but the highest
form of consumerism. No matter how you slice it, one thing for sure - environment wins
again. This much maligned deflation will do more for saving our planet than all Kyoto
protocols, carbon taxes, cup and trade schemes, renewable energy industries and electric
cars combined, simply by finally getting people to consume less. So it can't be all that
bad, can it?

[Lucky Luciano]

31. Call me selfish, but I prefer to see an exponential increase to my wages

rather than a decrease.

Also, I am nto a homeowner because prices in NYC are insane and I was waiting to have a good year when everyone else had a bad year so that prices would get more in line when I have the cash. Give me two years on that points - maybe three. I still prefer to not see people's wealth destroyed with their home values getting crushed even if I am not a homeowner.

[Trajan]

32. Excuse me ... but WHEN exactly has there ever been an 'exponential increase' of wages ?

As a long term union worker who enjoyed very good wages and benefits from the late 70's through the early 2000's, I have to ask - WHERE are these exponential wage increases you refer to ?

I have averaged less than 2% per year these last five years ... (In a non union shop) ...

When do the exponential wage increases begin ?

[Lucky Luciano]

33. Depends on the industry you work in of course, but deflation will make it certain

that wages go down for the vast majority of workers.

[Fool Count]

36. To be fair, 2% a year IS exponential, though it was probably exponential

decrease if you factor the inflation in. With deflation, even a constant wage will effectively
grow.

[quakerboy]

40. To be fair

A lot of the guys I work with remember being paid a quarter an hour at their first jobs. minimum is now 7.25. In one lifetime, thats a pretty massive jump.

They often also remember buying a first car that was in the low hundreds of dollars, and a first home that was in the single digit thousands. Bringing prices down might not be the worst thing ever. It could start to bring our work costs to something closer to par with the world, and make us more competitive. The key would be seeing other key things also decrease in price (thinking food, fuel, necessities, etc).

I'm sure an someone with more econ background could explain why this would not be a good thing, but costs down or pay up, either way seems to me to fit the needs we have.

[Trajan]

41. Well said ....

And if I had posted more of my thinking, it would be to repeat what you just said ....

I think deflation might be good medicine down the road, but the pain will be greater than trying to patch the giant holes in this sinking economic ship ....

Deflation will do something to balance the differences between regions, but it does seem a steep price to pay in the short and medium term ...

Personally, I think wage stagnation lies at the heart of the problems we see today .... You cannot continually restrict wage increases to a value that is lesser in proportion to cost increases, for years on end, and NOT have an impact on the overall economy eventually ....

The use of easy credit during the late 80's and early 90's provided spendable income OUTSIDE of earned income for families, who used the 'extra' money to purchase durable goods and building materials to improve properties with ever escalating real estate values .... Never mind that the debt from credit had to be paid eventually ... Everything was crazy easy to buy in those days ...


Who the fuck needs a wage increase when someone could just pull out another twenty grand from their McMansion ?


Of course; once the underlying basis for credit was found to be at least partially rotted out, and the bills became due ... well ... The rest is history they say ...

And here we are; our heads spinning round as we try to stay afloat by reducing expenses to the barest minimums ... Which is stifling more economic activity due to decreased consumer spending ...

The use of stimulus is only even considered because the 'free' system itself is moribund, I believe, because wages are unable to support a consumer based economy when they do not include 'spendable' income ...

Thanks to 'successful' conservative economic policy, we now find ourselves unable to spend beyond what our stifled incomes allow, and without 'easy credit' to bridge the gap, our stunted wages cannot keep up with prices ...

Well ... THAT bird has come home to roost ... Without INCREASED wages, the system will grow at the most menial pace, if at all.


If producers continue to produce at current levels, then inventories will expand, and prices will most definitely drop .... That is deflation ...

When prices drop, revenues drop, and personnel levels start to drop as factories try to balance supply and demand ... Less jobs ? ... Less consumer purchases ... GREATER inventories ... MORE reductions in capacity and workforce .... Egads ....



Wanna fix the economy ? ... INCREASE wages, and let business figure out how to pay for it .... OR ? .... We all go down together with deflation ...


It's all about how greed won ... and the people lost ...

[Fool Count]

37. The biggest destroyer of wealth in history is inflation. The whole benefit of

deflation is in modifying people's behavior for the better. You know of many
people who would change their behavior before their pocket book is affected?

[Ginto]

39. May want to research a little more

Especially under the "effects" section.

http://en.wikipedia.org/wiki/Deflation#Historical_examples_of_credit_deflation

Nothing like enriching creditors at the expense of debtors.

The rich get richer.

[formercia]

4. Economies based on Inflation

Depending on Inflation to stimulate growth is why we are all in such a mess. Like a Ponzi scheme, it will eventually collapse. This is all made possible by the use of Fiat Currency, created out of thin air. Inflation is the hidden tax we all pay to enable the oligarchs to amass their fortunes.

[sabbat hunter]

5. there always has been inflation

even when we were under the gold standard. A bit of inflation is good as it means an economy is growing.

[GliderGuider]

6. A growing economy is good?

That's an assumption that doesn't hold up in all circumstances. From an ecological point of view, a perpetually expanding economy eventually and inevitably becomes a disaster. A bit of deflation would do the world's species (including ours) a world of good.

[sabbat hunter]

8. not really

that expanding economy can use lots of green sources of energy and growth.

Deflation is extremely harmful, just as harmful as hyperinflation.

[GliderGuider]

9. It may sound callous, but

I think the world is overdue for a bout of deflation. Not that we deserve one necessarily, except maybe as a comeuppance for believing the economists about the feasibility of perpetual growth in the first place.

I see the global economy as inextricably tied to the natural world: to the finite resources of the planet and especially to the underlying ecological base. If we overshoot in our use of those fundamental resurces, the situation cannot continue in perpetuity. According to the WWF and other ecological analysts, humanity has already entered overshoot. We are currently using perhaps 50% more of the ecosphere than is sustainable.

Money can be viewed simply as an abstraction of human activity. If human activity depends on the stocks and flows of the natural world, then by extension money is an abstraction of our use of the natural world. As a result, if we are in ecological overshoot it's the same as being in economic overshoot. I's only a matter of time before the real situation in the natural world is reflected in its economic abstraction. When that happens, the economic correction will be driven by, and will mirror, the underlying ecological correction. A deflationary reduction in human activity will be the inevitable result. How this reduction might unfold is still somewhat imponderable, but we are already seeing the signs in global warming, the physical and biological state of the oceans, the fact that Peak Oil has arrived, and the current global economic downturn.

While we may say "Oh, deflation is too terrible to contemplate," forces of nature tend to be a lot stronger than human forces. Such a correction in human activity (and potentially in numbers) may be painful but it's also inevitable. It's the way nature works, and we as a species are by no means exempt from that mechanism.

[Viva_La_Revolution]

10. +1 nt

[sabbat hunter]

11. so are you saying that

the human race population needs to be cut in half or more?

[GliderGuider]

12. No.

None of us can or should make a decision like that.

I am saying that if things unwind over the next few decades as there are hints they may, we may find ourselves without the resources we need to support either our current level of activity or our current numbers. In terms of our numbers, a lot depends on what happens to the world's food supply as a result of the convergence of climate change, Peak Oil and economic instability. The future is still very murky on this score,but the outlines that are emerging from the mist are making some of us very nervous.

I personally believe that a decision to remain childfree today is probably in the best interests of life on this planet over the long term.

[formercia]

13. No, using less resources will return us to balance.

Per-capita expenditures of non-renewable resources has to decrease and other mechanisms need to replace the dependency, otherwise, we might end up using Hemp Oil to light our lamps.

Proponents of eugenics might use the population reduction argument, but that's not called for here, just living within our means.

Why are you bringing up population reduction? Some countries are already seeing a lowered birth rate and aging population

[sabbat hunter]

14. I am not

but it appears that GilderGlider was based on their posts.

[GliderGuider]

15. Your use of the phrase "need to" was problematic.

It implies that a) we can do reduce population levels through voluntary actions and b) that doing so would be desirable. I think the first point is not possible, so the second becomes moot.

It's not a question of "need to". Population reductions - if they happen - will be an entirely involuntary side effect of resource limitations. Voluntary action will largely be restricted to making the entirely personal decision not to have children. But doing that won't prevent the immiseration that might be on the way, it might instead be the result of it.

[Ginto]

27. That's like saying less taxes will allow us to grow. nt

[formercia]

34. I don't think so.

That is something a Republican might say.

Taxes are resources that, if properly used, will benefit all. Taxes are a renewable resource.

[Ginto]

38. Less expenditures, less taxes, less social spending.

It is not a hard equation.

[formercia]

42. My, what a progressive statement.

:rofl:

[Ginto]

43. It's what you're promoting. nt

[formercia]

44. Quite the contrary

Tax the Rich more, increase social spending to provide more of a safety net in these hard times and decrease defense spending, also add single payer health care. That's what I say.

[Ginto]

45. That has zero to do with deflation.

All you are doing with deflation is making sure that debtors are penalized while creditors are rewarded.

[ProudDad]

20. The answer is -- MORE...

By intelligently planning for the inevitable power-down in our future...

And instituting a CRASH program of EQUALIZING the distribution of the Earth's resources before it's too late...

And empowering women and making all forms of birth control freely and widely available...

The human population would decline naturally down to a sustainable level (probably less than 2 billion people) within 3 generations...

No "genocide" or "euthanasia" required...that's the province of limited minds...


(Although, I seriously doubt that humans in the aggregate are that intelligent)

[Ginto]

28. Like eliminating COLA for SS and then slowly reducing payments?

Can't have any growth can we? Since Japan is an aging population, birth control does not seem to be an issue. Last I heard, whole villages were disappearing.

[sabbat hunter]

30. China and Europe

also will have declining populations in the near future. China with its one child forced policy is going to see a rapidly aging population in the near future which will lead to a decline in population.
Europe's number of children per family is below the 'replacement' rate of 2.0.

Russia is also seeing a declining population.

If it wasn't for immigrants/recent immigrants, the US might be in the same boat as europe.

[GliderGuider]

29. Humans do not plan intelligently for the future

Not outside very limited kinship groups anyway, and especially not if it requires people to voluntarily disadvantage themselves to any great extent.

Equalizing resource distribution is a nice altruistic concept, but it's just not going to happen that way. Our triune brains are not evolved to do that. Dunbar's number identifies the limit of the span of our altruism, and our innate hyperbolic discount function keeps most of us from even recognizing that there's a problem out there over the horizon.

We may have some degree of free will on an individual level, but as social critters we are largely in thrall to our evolutionary heritage.

I'm sorry if I sound a bit harsh, but we will not make it through the coming shitstorm by believing that things are other than they are.

[formercia]

35. Many long-gone civilizations prove your point.

Fortunately, in the past, the damage was localized due to low population densities. This time, it's Global.

[ProudDad]

19. +1000 -- It is SO refreshing to read something on this board

written by someone who GETS IT! :hi:

http://www.alternet.org/module/printversion/148928

www.transitionus.org

[GliderGuider]

23. Thanks!

I'm still working on getting it, it feels good to get closer. :hi:

[ProudDad]

18. Not the "corporate growth economy" we're being exploited by...

There is not enough SUSTAINABLE "alternative" energy available to replace the brief 150 year heroin fix of fossil fuels...

Further "expansion" is NOT an option!

http://www.alternet.org/module/printversion/148928

[Fool Count]

24. Extremely harmful? You don't say. Really? Only in the minds of growth-obsessed

ideologists for the industrial and financial elites and of their brainwashed victims.
Japan has been experiencing deflation in some form for two decades now. How did it
"harm" them? I just visited the country and certainly did not notice any "extreme" damage
there. It is still an advanced industrial economy and an egalitarian society with highest
life expectancy and standard of living in the World. People also seem pretty happy and
content. All that crap one reads about the "lost decade" and "lost generation" is just
that - the new generation of Japanese are simply slightly less into working themselves
to death to buy crap they don't need. I can understand how that development can scare
the hell out of their masters, but why should anyone else be concerned about it, I have
no idea.

[Psephos]

25. SS, MC, and finance of the national debt require a growing economy to avoid insolvency

That's not an opinion, that's a fact.

Without sustained annual growth of at least 2.5-3% they become Ponzi schemes, and their ends are certain.

If we can get sustained annual growth of 4%, then we can balance the budget within ten years, and after that, use the surplus to start paying the debt down.

4% year-over-year looks like pie in the sky for an economy as burdened and dis-incentivized as America's.

[FreakinDJ]

7. Ponzi scheme like the Milton Freedman economic model

look where it has gotten us today

[Dreamer Tatum]

16. Care to actually explain that?

With data and logic, not (misspelled) name dropping.

[ProudDad]

21. Use your google machine

with the correct spelling...

It's obvious even to Alan Greenspan now that Milton Friedman was full of shit...

[FreakinDJ]

26. The end of Ponzi prosperity

Consumption rather than investment drove growth, particularly in the developed world. Debt fuelled consumption became the norm. In the new economy, there were three kinds of people - “the haves”, “the have-nots”, and “the have-not-paid-for-what-they-haves”.

http://www.dnaindia.com/money/comment_the-end-of-ponzi-prosperity_1257576

[ProudDad]

17. The most important international struggle

is whether capitalist exploitation ends before destroying the Earth as a viable habitat for air-breathing mammals...

Or not...

Because it's collapsing, the only question is whether the collapse will allow for any survivors...


http://www.alternet.org/module/printversion/148928