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Re: The Fed is hiking rates excessively into an economy where consumer spending growth was only 1.1% in Q1. This probably won’t end well. 

By: Decomposed in POPE 5 | Recommend this post (1)
Tue, 08 May 18 6:35 AM | 48 view(s)
Boardmark this board | Pope 5 		Msg. 00746 of 62138
(This msg. is a reply to 00735 by nacl01)
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nacl:

Re: “Tha is something I have never understood. Electeical/electronic/ technological equipment has always been in a deflationary environment.”

That isn't deflation any more than a seasonal fall in the price of tomatoes is deflation.

Deflation and inflation are system-wide phenomenon. They are only caused by changes in the quantity of currency or the productivity of the system.

The problem that the Fed has with deflation is that if people decide that prices on everything will be lower in the future, they'll stop spending money. If that happens, the Fed is very limited on what it can do. It can lower interest rates, but zero is the practical limit on that. As Japan showed, if people decide to save all their money because prices are falling, the economy shrivels up and dies.

Now that I'm retired, I'd be fine with that. Lower prices are better for me.




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Gold is $1,581/oz today. When it hits $2,000, it will be up 26.5%. Let's see how long that takes. - De 3/11/2013 - ANSWER: 7 Years, 5 Months


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Re: The Fed is hiking rates excessively into an economy where consumer spending growth was only 1.1% in Q1. This probably won�t end well.
By: nacl01 in POPE 5
Mon, 07 May 18 9:12 PM 		Msg. 00735 of 62138

Deflation spooks the Fed

Tha is something I have never understood. Electeical/electronic/ technological equipment has always been in a deflationary environment. Anyone who ever wanted to buy a light bulb (early on), a television, or a computer has known that, if you wait, it would be cheaper. Those sectors have led the economy for most of the past 140 years.

nacl

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