Monday, July 20, 2009

Inflation?

Invictus has a good post over at Bondad's about those worried about inflation. I keep hearing the rightards trying to throw the fear cards at us once again about prices that will hit the roof and you'll need a wheelbarrow full of money to buy a loaf of bread. That won't happen for several reasons as he points out with his graphs and charts. The simple answer is this: Demand. With babyboomers poised to hit the gold watch crowd they tend to down size and hold the line on spending. That is based on the nagging fear in the back of their minds that they'll run out of money long before they take a dirt nap. You also must remember that these were the same folks who when they were in their 30s and 40s were able to pull us through the last economic downturns. They went from the beater cars they had in their 20s to the upscale sedans and SUVs to haul the spawn to soccer games. The boomers are downsizing and doubling up or worse trying to split the rent with their parents that is if Ma and Pa didn't move to a retiremnt community in Az. If the spawn didn't find a career path then they're comming back home to either share with the bills or worse become a fungus on Mom and Dad. That is if Mom and Dad didn't split before the meltdown hit. If they didn't they can't do it now and are stuck with each other.

So inflation? No. People have come to realize that they can get by just fine without all the junk. What didn't get sold at the garage sale either gets donated or thrown out.

Inflation? computer says no

Update: Seems somebody is skeptical about my analysis. Well don't trust me then take it from an award winning economist.

From Paul Krugman Pop through some of the links in this article. He gives some very simple explainations that even a simple guy like me can understand.

7 comments:

an average patriot said...

In no way could I envision inflation but everything you said and worse coupled with local government food and water problems. At this point I can only laugh because in 2007 I was warning people and they laughed. No one is laughing any more.

S.W. anderson said...

Demographics might blunt it somewhat, but I'm sure we're in for a bout of inflation after the economy recovers. Our public and private debt load is off the charts and growing. No one knows how big and bad the inflation will be. In any case, it should be easier to contend with than the mess we're in now.

BTW, I just got through reading a convincing case made that since the '90s the government has fudged both Consumer Price Index and Gross Domestic Product stats to make it appear inflation is anywhere from 1 percent to 3 percent less than it really is.

dana said...

Lucky mom and dad. They raised their kids, went into hock for them, sent them on their way, and now they have the grandkids to raise.

Holte Ender said...

I can deal with a little bit of inflation, don't like it, but I can deal with it. What I don't want to see is deflation.

S.W. anderson said...

Holte Ender wrote: "What I don't want to see is deflation."

Amen to that.

S.W. anderson said...

Holte Ender wrote: "What I don't want to see is deflation."

Amen to that.

Demeur said...

We've already seen deflation in the housing market with a drop of 40%. Not as bad as during the "Great Depression" which was 50%. Again with not much demand prices except for food have been falling. If you can't get a deal on anything you buy right now you aren't trying.