Why would the FED want to fight Deflation?

Federal Reserve to start the deflation fight next week, expert claims

The Federal Reserve is set to kick-start a new phase of monetary easing, a leading Wall Street economist claims. Paul Sheard, Nomura's chief global economist, argues that the current conditions are ripe for the American central bank to take affirmative action to put the US recovery back on track.

Bullard Says Fed Must Be Ready to Confront Deflation

Bullard, who last week published a highly publicized paper on the risk of deflation, said the fall in inflation expectations during Europe's debt debacle in the spring gave him pause for concern.

So what is deflation?

In economics, deflation is a decrease in the general price level of goods and services.[1] Deflation occurs when the annual inflation rate falls below zero percent (a negative inflation rate), resulting in an increase in the real value of money – allowing one to buy more goods with the same amount of money.

Source


So if a currency deflates it has more buying power. I cannot understand how this is a bad thing. Could someone please enlighten me.

reply to post by SWCCFAN


Because they are a criminal private cartel of banks that profit from the expansion of debt?

In our debt = money system, deflation means a reduction of debt is occurring.



[edit on 3-8-2010 by mnemeth1]

reply to post by mnemeth1


Well I know they are criminals but wouldn't any educated person wake up to this?

Personally I think there should be a mandatory bankster regerstry.

ETA: So a rdeuction of debt good for we the people bad for the banks, I gotcha.

[edit on 3-8-2010 by SWCCFAN]

reply to post by SWCCFAN


"Well I know they are criminals but wouldn't any educated person wake up to this? "

Because the media is nothing more than an organized State propaganda arm?

reply to post by mnemeth1


This is just one more abuse to add to the list. Soon we will be forced to re-delare independence. We have been denied every way of peacefull redress. Elections can and will be stolen, Juries can be comprimised; So they got the ballot box and the Jury box.

What do we have left?


The ammo box.

reply to post by SWCCFAN


"What do we have left? "

gold?

Because when there is deflation, the price of things starts to reduce.

If this happens for a while, people will see that prices are falling and think "why buy today, when it'll be cheaper tomorrow?", which exacerbates the problem. So prices start falling, people aren't buying, and companies start collapsing from lack of cashflow - leading to loss of jobs, even less people buying and then you start spiralling into a depression.

So deflation isn't really something you want

reply to post by mnemeth1



If we see deflation, the price of gold will drop like a rock. Gold might possibly be good for hyperinflation, but if we go to deflation, the people invested in gold are going to lose a chunk of their investment.

Originally posted by Malech
Because when there is deflation, the price of things starts to reduce.

If this happens for a while, people will see that prices are falling and think "why buy today, when it'll be cheaper tomorrow?", which exacerbates the problem. So prices start falling, people aren't buying, and companies start collapsing from lack of cashflow - leading to loss of jobs, even less people buying and then you start spiralling into a depression.

So deflation isn't really something you want

Yeah, that's the standard retardo-Keynesian argument in favor of printing money.

If we could make ourselves rich by printing money, why not just print 20 quadrillion dollars right now and give it to everyone?

hmmm?

Originally posted by BubbaJoe
reply to post by mnemeth1

 

If we see deflation, the price of gold will drop like a rock. Gold might possibly be good for hyperinflation, but if we go to deflation, the people invested in gold are going to lose a chunk of their investment.

Did you not read the OP?

They will print us into oblivion.

At which point gold will become the de-facto monetary unit again.

my fear is if we get into hyper inflation ....
we will all be destitute

reply to post by mnemeth1



If they truly print us into oblivion, we will see hyper-inflation, check the history of Germany in the 20's. It took a wheel barrow of money to buy a loaf of bread. If we truly go through a phase of deflation, many companies/persons will fail, because they are paying back debt with dollars that are technically worth more.

Think of a farm, wheat is 4 dollars a bushel, and they are making a small profit. If the price of wheat drops to 1 dollar, what is going to happen to them.

Just saw this:

Fed Printing May Create 'Final Crisis': Marc Faber

The Federal Reserve will create a "final crisis" by continuing to print money because it is underestimating the strength of the economy, Marc Faber, the author of "The Gloom, Boom and Doom Report," told CNBC Tuesday.

That seems to be the agenda kill America anyway they can.

reply to post by SWCCFAN


Yeah except the Glenn Beck/Goldline guys, they might do ok, maybe.

I hear from some good sources watch for a contraction of the GDP to go along woth the defalation-4th Q
might signal a lean Xmass...
Obama just froze Iranian bank accounts...that money will bail the US out...

Originally posted by SWCCFAN
Just saw this:

Fed Printing May Create 'Final Crisis': Marc Faber

The Federal Reserve will create a "final crisis" by continuing to print money because it is underestimating the strength of the economy, Marc Faber, the author of "The Gloom, Boom and Doom Report," told CNBC Tuesday.

That seems to be the agenda kill America anyway they can.

Leave it to CNBC to blatantly obfuscate its headlines.

The headline makes it sound like Faber thinks the economy is fundamentally sound and the Fed its underestimating is strength.

If you listen to the interview, Faber says exactly the opposite. He says the Fed is underestimating how weak the economy is.









[edit on 3-8-2010 by mnemeth1]

reply to post by Danbones


Yeah its been a lean year for me already. I lost a great job offshore and since the Adminastration shut down the drilling operations i can't find another job out there.

It sux.

reply to post by mnemeth1


I guess we are living in a time of double speak.

1984 = 2010

Basically for some of the reasons already posts it can be considered a bad thing. Sometimes if it happens as the result of productivity gains it can be good - kinda like you figure out how to make something cheaper and can charge less.

But - if it happens as the result of people mucking about with the economy when they shouldn't - it can be bad.

Read..

Deflation: The Good, The Bad and The Ugly

and...

Why Is Deflation Bad?

Why? Simple.

To protects their Interest (pun intended).