Geithner said he'd prefer to "err on the side of inflation"

[DeepBlueC]

I've had that in my mind all day and now it has settled into my stomach and knotted it up good. The last big round of inflation knocked me back and another round could knock me out. I mean I know it's bad for the population in general, but for me deflation will hurt a lot less than inflation. In fact if it takes inflation for the economy to recover, I could be, hell, WILL be, a casualty of Geithner's plan, as will everyone else on a fixed income. Am I getting that right?

:scared:

[amborin]

1. G must have been reading K

K and many others are rightly terrified of a deflationary spiral....

so erring on the side of inflation makes sense

and inflation will help the US unburden itself from its crushing debt

but it's a killer for anyone on a fixed income, no question

[DeepBlueC]

7. shit, I was afraid of that

That could mean trouble for a lot of people on the lower end of the economic scale.

[amborin]

17. K has their interests at heart

believe me, a spiral of deflation would wipe out folks on the lower end so fast.....

wages decline, layoffs, while mortgage and other debts stays the same.......

[rockymountaindem]

2. Some inflation is better than a decade-long economic wipeout

It also means that they're going to err on the side of spending more in terms of stimulus/bailout money rather than less, which means it's going to be even more important for them to spend wisely.

[Pirate Smile]

3. Deflation, which is what they are worried about, would be much worse.

[Venceremos]

4. Stock up now if you can n/t

[DeepBlueC]

8. with what?

I'm thinking of how my expenses will skyrocket but my income will not, and my savings will be devalued.

[bluestateguy]

5. 7-8% inflation won't kill anyone

IF it comes with a growing GDP again.

Double digit inflation, however, would be a problem.

We're going to have to end up raising taxes for everyone in about 5 years anyway.

[DeepBlueC]

10. On a fixed income inflation hurts

and there are no compensating benefits. I can tell you that 7-8% will hurt me.

[terisan]

6. Yes I think they can't sell the paper to pay for bailouts/stimulus at current rates so

inflation may start sooner than they had anticipated.

I've noticed steep increases in food prices in my area and I had expected declines-maybe the producers and grocers are figuring they need a head start.

[RoyGBiv]

9. Worry about hyperinflation ...

Hyperinflation is the real danger with that end of the curve.

But Geithner's comments make sense in the current context. A deflationary spiral is far, far worse than a round of above average inflation. With that danger looming so closely, erring on the side of inflation only makes sense.

[bridgit]

11. To err is human, to inflate divine? Well no, that makes sense...right?

:dunce:

[DeepBlueC]

12. Inflation will hit people on Social Security

Aren't we hearing rumblings of controlling entitlements? Sounds like that could squeeze Social Security from both ends.

[Cleita]

15. SS technically is supposed to have yearly raises to keep up with inflation

although they didn't do a very good job of it during the Bush administration. What will be hit is savings. For one thing, hardly anybody is making much interest on savings and inflation will wipe out the value as well.

[defendandprotect]

16. Some say SS checks would be double what they are now . .

except for gimmicking the inflation rates and tables ---

I certainly watched the GOP on C-span attempt to do a lot of that --

with the most ridiculous arguments!!!

[scheming daemons]

13. Deflation is 10 times worse than inflation

Deflation leads to a downward spiral in which EVERYTHING shuts down.

Everything.

Your fixed income will be worthless, with no where to spend your money.


Deflation leads us back to 1932.



Inflation, even at its worst in our last 100 years, led to 1981.


I'll take 1981 over 1932 every day of the week.

[AyanRand Is Dead]

21. you mean like pay cuts and reduced hours.

I think were already seeing that.

[Marsala]

22. Which is why deflation has to be stopped

So that we don't see any more pay cuts, reduced hours and massive layoffs. Inflation is bad, but deflation is catastrophic.

[mwooldri]

23. Would hit everyone, especially those on social security.

AFAIK SS is linked to inflation, so if it goes negative people I guess would get social security cuts?

Maybe someone could clarify.

Mark.

[Cleita]

14. If they start the presses rolling at the mint, they can pay off the debt

faster. Of course that will cause inflation and devalue the dollar, which will devalue most working class and elderly people's savings. It's what I've been fearing more than anything else.

[backscatter712]

18. I'm hoping Geithner keeps inflation to a dull roar.

But he's right - inflation does indeed suck less than deflation. Let's hope his plans increase the money supply by the right amount - the amount required to stop deflation, inject enough money into the economy to get things moving again and get the economy on the mend, without bringing inflation too high.

And if inflation does indeed rise, let's hope that Obama can beat enough sense into the .gov to adjust things like social security so people on fixed incomes aren't too badly screwed.

[The Traveler]

19. The chief advantage of inflation

is that we know how to handle it. That doesn't make it fun or painless but it can be managed to a degree. Get us into an inflationary situation and we can cut taxes, cut government spending, do all sorts of stuff to cool that down. Let us fall into a deflationary spiral and, as near as I can tell from my readings, we have little to no ability to control things.

No one knows how to manage a deflationary spiral. No one can predict how long one might last. Government spending treats the symptoms in the hope that the patient will thereby survive long enough to recover, but is in a real sense analogous to theraflu. It makes the disease less painful, and helps you function through it, but it does nothing to cure the disease itself. It does buy time during which restructuring can be accomplished.

What we are facing is a global deflationary spiral that makes the Great Depression look like a walk in the park. If the Great Depression is any indication of what happens politically in those circumstances, we can expect a resurgence in authoritarianism ... like Stalin's Communism or Hitler's Nazism. And as a consequence we can expect even more militarism as powers contend for economic and political leverage. We don't want to go there.

I'm no fan of inflation either. Or stagflation, which is even worse. But those conditions we have at least some practical means of managing. Deflation ... that's a whole different beast.

Just some semi-random thoughts on the issue. I don't really understand economics ... I know enough about it to be foolish while sounding semi-well informed.

Trav

[RoyGBiv]

24. Economics ...

You understand more than the average person.

I thought this was well stated.

[AyanRand Is Dead]

20. Geithner is really scaring me.

He's like the Frankenstein bride of Paulson on steroids. This isn't ginna be the "New Deal" it's going to be the "Raw Deal".

[Nicholas D Wolfwood]

25. Deflation would hit you MUCH harder, believe me.

You might temporarily like the low prices, but the accompanying high teens unemployment rate would freaking kill everyone.

[Odin2005]

26. Geithner is saying that some inflation is far better then deflation.

Mild inflation is a minor nuisance. Deflation destroys economies.

[crimsonblue]

27. Inflation is economically necessary

With out it, there can be no considerable growth in the economy. Also, inflation isn't much of a risk these days, as near zero Fed rates, stagnating wages, price collapses across the board (food prices will be next, as last year saw some of the best harvests on record), and an increase in real debt. We need tkworry about deflation, because if allowed to propagate, it can destroy the economy.