It is now an established fact that Japan has been mired in deflation for the last 18 years. It meant no economic growth as manifested in the below GDP graph. Assuming that USA is now in the early stages of a similar, if not much stronger, deflationary depression, we may be able to project future US GDP growth/contraction based on the Japanes experience.
“The recovery is very weak and the U.S. is running the risk of deflation…” say the Japanese investors as they are piling into US Treasuries while expecting the yields to drop sharply. They may be the only ones in current economic environment that have extensive experience investing in deflationary times and so it may be worth wile heeding their advice:
“Demand for Treasuries is very good because of the idle money in the banking system…”
“The medium term risk toward inflation is being caused by potential policy missteps by policy makers in regards to monetary and fiscal policy and the weakening dollar…”
“Any economics textbook would tell you that the massive stimulus from the central government will eventually cause inflation, but the Japanese know it doesn’t have to turn out that way…”
“The U.S. economy has faced a double whammy: the recession and credit contraction. The U.S. will face a triple whammy with deflation. That’s good for the Treasury market.”
Quite a sensible article from an MSM source, Telegraph of UK, that aptly discusses the real state of things on the Central Banks’ front of deflationary fighting and suggests several solutions out of this global economic crisis. I, however, do not agree with the proposed solution ouf of indebtedness problem that we the people should pay down the debts as the author puts it “very slowly, by sweat and toil”. This contradicts the very natural economic self-interest of the majority of hundreds of millions of people that were either duped into borrowing by financial wizards or had to do it as they saw no other way of being able to afford things as the wages stagnated for decades. No, I propose to default on all the debts, walk away and let the owners of this world financial system have it. I in essense call for a debt revolt, stick it to them and let them be crushed under their own debts.
This article from GoldSeek makes good points and explains quite clearly why US is going to stay in deflation much longer than most people and so called “economists” think, and why the privately owned FED is unable to reinflate the debt bubble.
Unlike Government orchestrated propaganda campaign to proclaim imminent recovery, the Government bonds investors and Central Bankers know that deflation is no where near the end. Both Japanese Government bond prices and Swiss National Bank officials tells us – deflation is here and not going away.
There are winners and losers, just as there are from most economic developments. The important point is that the people who lose are more powerful than the people who gain. That might explain why we hear about the dangers of deflation, and not about its advantages. It still doesn’t make them right.
There is no threat from deflation. It may even be desirable if it encourages a balance between saving and consumption, and discourages governments and banks from taking on debt.
If one were to listen to the policy makers and news media, one might think that deflation may still be averted and has not yet arrived. But if one reads the official economic statistics from around the world one will see that deflationary spiral has already arrived and is beginning its whirlwind motions in earnest.
Japan is decades ahead of US and the rest of the world in fighting deflation by all means necessary. US is now following the same exact failed policies of reflation and Quantitavie Easing as has the Bank of Japan for the last 15 years.
Deflation is not only here it is accelerating and bringing with it the much missed affordability. The big hope now is tha the benign force of deflation will be spreading to food and medical services CPI components to make lives of ordinary people even more affordable.
Japan has had a two decades experience with real prices stability, also known as deflation. See when the privately owned US Federal Reserve inflates money supply they erode both wages and savings – that is no price stability. That is criminality. But eventually the laws of physics take over and the privately owned FED is powerless to stop it.
