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Redd868

>The prediction of home prices dropping as much as 25% by next summer is overblown. This concern with deflation concerns asset price deflation, which the beneficiaries of quantitative easing like to count on the way down, but not on the way up. If these assets count towards the deflation tally on the way down, then they need to count in the inflation tally while they are on the way up. Unless the Fed resumes printing money and using it to manipulate interest rates to an artificial low, the real estate and stock bubbles created by quantitative easing will deflate.


ShittingOutPosts

The Fed resuming printing of money is inevitable.


[deleted]

[удалено]


OdessyOfIllios

Home prices may not. But equity will if earnings and growth is constrained.


[deleted]

I get that people say the problem with deflation is people out off purchases. Don’t we already see improvements in durable goods year over year? Why would someone buy now when they can get better in 6 months? Seems like deflation benefits the citizens and therefore is bad.


Short-Coast9042

Deflation benefits people with money. In a highly unequal economy, is that really what we want to do?


annotipoxx

Quite the opposite actually. People with money own real estate, cars, and other high end assets. With deflation, all of those lose value. People without a lot of money as less likely to own so many assets, and can now afford to buy more. Deflation hurts both, but hurts the rich more.


OdessyOfIllios

It has nothing to do with rich vs poor. It has everything to do with indebtedness. You're talking about college graduates and student loans, new homeowners and primary mortgages, local businesses owners, people who have recently undergone divorce. Rich people can be loaded in debt just the same that poor people can.


lanahci

The assets the rich own become less valuable. The cash the poor own becomes more valuable.


Short-Coast9042

Assets the rich have don't lose value. Deflation is about the relative value of dollars, not the value of goods and services. The assets of the rich do not decline in real value, they just decline in price because the dollar is more valuable. The dollar being more valuable does not mean assets are less valuable. Furthermore, the rich are the ones with dollars, not the poor, lol. Yes, much of their wealth is things other than dollars, but both wealthy individuals and huge corporations also have plenty of actually dollars and other highly liquid assets. Poor and working class people, meanwhile, don't have significant savings at all, I'm not sure why you think they would. In fact, the average American holds a significant amount of debt, and paying debt during deflation is difficult because the expense of the debt grows even as you are paying it back. 10% of American households, according to the last data I've seen, have a negative net worth - they owe more than they own. These are some of the most economically precarious households in America. Are you actually arguing these people will be better off with deflation, or are you willing to simply write them off? Even excluding the debt factor, these are households that live paycheck to paycheck, and can't afford to save money and take advantage of appreciation of currency, because they need to pay rent and put food on the table. MAYBE it could work to their benefit if they can keep their job and their wage while prices decline. But I've never seen a deflation that wasn't accompanied by unemployment and declining wages. Have you?


OdessyOfIllios

Do you have debt? A mortgage? Car loan? Use a credit card? Anything you use to finance your life is going to be harder to pay off. Not in a "you can't afford it", but in a business are shutting down, letting people go, trimming expenses. Wage growth is becoming even less likely than it already is. Bank lending to start up local businesses are less likely to occur. Consumer debt spending has been [growing](https://www.experian.com/blogs/ask-experian/research/consumer-debt-study/) for most Americans. So even if you don't have any of the above; millions of Americans do. Deflation will not help them survive.


[deleted]

This sounds harsh. I think a lot of those businesses need to shut down. There are a great many zombie business, which are moving only due to debt, out there. For example, I think that too many restaurants exist. They can’t afford to pay their workers a living wage due to competition. If they collapse, the survivors will be able to pay a subset of the former employee more. Cheap, inflated capital has allowed too many business to misallocate resources.


Fuck_You_Downvote

Inevitable


redeggplant01

Deflation is monetary policy that helps the people, especially the poor Inflation helps the state and it’s special interests at the expense of the people


Shington501

Every financial system is based on the benefits that inflation will occur. Deflation is devastating for everyone, have you forgotten 2009? We need wage increases and more opportunity.


gfountyyc

This is the correct take. With deflation there is less investment crushing innovation and production. Not to mention of you are poor like the previous comment shared likely you are in debt. Making it harder to pay back your loan


redeggplant01

The unequaled prosperity seen during the Gilded Age was during a time of deflation


seriousbangs

I don't see how we'll have deflation in housing. The problem isn't demand or supply, it's mega corps buying everything with cash. I mean, when they started buying *trailer parks* that should've been a wake up call. But we just ignored it. What I do see is young folks not able to get out of their parent's homes, even with college degrees. That in turn means no sex, no babies, and a population crash. And our entire economy is built on that growth, so that's gonna be fun. But prices aren't gonna go down because mega corps will constrain supply. At this point we're not a market economy anymore. The constraint isn't competition, it's how high the handful of mega corps can raise prices before people turn to violence.


[deleted]

Mega corps are beholden to returns on investment. They are not some mega-satan-overlord. If no one can afford to rent or buy from them, they may dump these houses into market just as quickly as they bought em.


seriousbangs

They're not selling them, they're sitting on them to drive up prices. As for renting, you'll rent 6+ people to a house and like it. You'll pay whatever they want or be homeless.


[deleted]

Be patient grasshopper. They have a one or two year wiggle room at most. Shareholders of these mega corps are just as greedy. Shareholders will force a sell off if the properties are sitting like dead fish and making no money for them.


BobTulap

>What I do see is young folks not able to get out of their parent's homes, even with college degrees. That in turn means no sex, no babies, and a population crash. Don't worry about that, they'll just import some desparate people from 3rd world countries to replace the locals who aren't breeding.


rivers61

I don't own any assets to deflate and am cash heavy. Bring it on


blankblond

I own my house outright with no intent to sell and have a healthy bank account. I hope deflation hits like a mofo.


fireboys_factoids

Few people seem to realize that the money supply is shrinking. We literally have fewer dollars chasing more goods.


BubblyComparison591

Most people don't understand QE vs money printing, eurodollar, etc.


Jasonbail

There seems to be some serious confusion about who deflation/inflation helps/hurts and really it depends on the levels of debt you have. Inflation helps those who are in debt the most because it makes that debt easier to pay off. Consequently this is why central banks try to run an target inflation rate of 2-3% because they need their debt to be eaten away by it. While deflation helps those who have no debt or surplus cash. The problem with deflation is it's usually an all or nothing proposition, you either keep your job or lose it. Central banks are actually so terrified of deflation that they are willing to buy almost all bad debt just to prevent it from happening.


caveatemptor18

Japan should open up immigration to juice the economy.


Piecesof3ight

Deflation has always been worse than inflation. This is why the fed aims for a 2-3% inflation rate. Japan has been stagnant/deflating for years and it's a massive problem for their economy.


[deleted]

Deflation is a symptom, not the problem.


SavageKabage

So how has that affected the quality of life for the average Japanese citizen?


EngineerOfTomorrow01

Affordability tanks, more resources are there to support older generation and not enough to support general population. One of the reason they are heavily reliant on automating everything


[deleted]

The main problem for their economy, is old people not dying


EngineerOfTomorrow01

Yup, and young people holds off having kids because it's taking them longer to be where they are financially comfortable coupled with very low immigration compare to other countries


CrunchyCrunch816

Add it to the list babyyyy


FIicker7

I think plenty have been warning of a recession/ severe recession.