It may be a bit of “make work” type of job but at least you are getting *something* in return for your tax dollar. Or would you prefer we just pay unemployment and welfare to vast numbers of people who are without a job?

In the scenario of another “New Deal” we aren’t talking about men and women who want to just sit home on their butts. The people put to work want jobs.

I certainly wouldn’t ask for a 2nd great depression so we could clean up our parks, but if rampant deflation caused one then what? If we’re paying a significant percentage of citizens some kind of money it sure would be nice to at least get those clean parks out of it.

Most people who have at least taken intro economics understand the Supply and Demand Curve. But what happens if that Demand curve shifts to the right? Then prices increase – this may be the market’s way to shift us back to a normal X.

@ DArin, I think the reason electronics like computers and such can exist with deflation is simply because those items get better with each new product generation. If they were producing the same quality stuff every year and had deflation then that industry would hurt, but since they can make it better, faster and cheaper the consumers still have a reason to keep coming back for more. And decreasing prices allow the products to be sold to a ever wider world wide market.

Jim

How many people want to pay extra to “compost public school lunch”?

I guess it’s really easy to spend other people’s money when it isn’t yours or you relieve on confiscating money by force to fund your pet projects.

There is really no such thing as society
“putting people to work”- at least not in a world I want to live in. People put themselves to work and create work in services where they are needed and there is a demand. If there is an actual demand for services people will choose to fund them voluntarily. If you have rely on force to fund your pet projects, they are not worthy.

If you think DVDs and other things are “junk”, then create something that isn’t junk and people want. Don’t just make a “jobs program” that wastes other people’s money and production.

If our economy has been flourishing because so many people have been able to get easy credit and spend more money than they could afford… then maybe the situation now is a necessary correction. The unfortunate thing is that people who have done everything “right”, who are not heaped in debt, who pay their mortgages on time, are also the ones who are suffering.

“If a lot of people choose to spend their money later and not spend their money now, products go unsold. Because there’s no demand, manufacturers slow down production. Factories slow down. People get laid off – and then can’t spend money anyway. Retailers cut costs to try to attract buyers. And the cycle continues.”

THIS IS A MYTH!

Let me give you an example. You have $20,000 of discretionary income. You can spend it (let’s say, on a car). But you decide not to. Oh no!

But you have to do something with that $20,000. Typically, if you don’t spend it, you will invest it — either in a savings account, a CD, stocks, bonds, etc. As long as you don’t put the money in your mattress, the money goes into the economy either way!

Remember, when you invest, either a company or a bank has the ability to use that money — just the same as they would if you spent it! (In fact, sometimes savings is BETTER, due to fractional reserve lending being able to create more money.)

Spending is NOT the only way money helps the economy! Do not fall for this myth. It’s the same myth that told people to pull money out of their houses and use them for ATMs and drove our savings rate to a negative number.

Deflation after a long period of high inflation is a good thing. More savings is a good thing. Don’t let whoever likes to circulate these “spending is the only thing that can save the economy” rumors get to you.

Please read “Economics in One Lesson” – it’s a book, by Henry Hazlitt, that is now in the public domain: http://www.hacer.org/pdf/Hazlitt00.pdf

Especially the chapter on “Bailing out the X industry”…

Also, a more recent summary of the same idea on the WSJ: http://online.wsj.com/article/SB122663413095027641.html

-Erica

Should we expect the government to adjust the minimum wage *downward*?

Meanwhile all those credit card and car loan principals will be just as big as they ever were; but you might be making less money to pay them with.

I think all things considered it is better to remain relatively stable than to have deflation or inflation. We have had a large amount of what I call shadow inflation in the past few years. This deflationary cycle is natural, and will help create balance.
I doubt any deflation will last for too long because of how much money our governments pump into the system.

Cheers,
Jeremy

Dropping prices can not support high wages unless profit margins increase. In true deflationary times, that is not likely. But not all prices will drop, many basic necessities (food, clothing, energy) will increase in price as dwindling supplies and higher demand bucks the overall economic trend.

Long term deflation means a societial shift from industrial/urban living back to agrarian/rural subsistance. Large industries will collapse without anyone purchasing their products and all those jobs would vanish. Large cities could not be sustained without the infrastructure to support a densely packed populace. Back to the Dark Ages.

Yet another example as to why all debt is bad. Losing the farm would mean losing food, shelter, income all in one swipe.

Hmm, you know, I realize that I’m more or less suggesting a New Deal for America — take those who’ve been left unemployed because the factories making “consumerist junk” closed down and put their skills and smarts to use in the equivalent of a Civilian Conservation Corps, fixing up our national parks; the Civil Works Administration, building bridges to somewhere; a Public Works Administration and a Works Progress Administration, building or fixing up roads and other public works. Deflation wouldn’t diminish the national importance of national parks, sustainable-energy plants, better roads, or better and more teachers for the nation’s children.

I’m not a fan of big government, really. But when private enterprise lets you down as badly as it has, maybe it’s time to try something else for a while. One thing I *am* a fan of is my tax money going toward public programs, roads, parks, education, and the like — not toward bailing out banks, property owners, and auto manufacturers. So, yeah, Kristine, I agree; it seems to me if we can afford to bail out AIG, we can afford to put our money where it’ll do the nation and its citizens more long-term good.