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Deflation, Left, Right and Center

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OptimizedPrime

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Deflation, Left, Right and Center -- The Dummifying of the Right Explained

So here's a brief history of the World (in my narrow context):

1. We had a Great Depression (my story starts here) and we embraced Keynes--tax and borrow, spend and stimulate.

2. Lots of people thought it "worked" (there was WWII but no matter). It became a big part of economic thinking.

3. Alan Greenspan shrugged. He didn't see the housing downturn coming because he was focused on "normal" fiscal and fed stimulus, and he reckoned the free market would work things out. He missed the fact that the government-assisted housing finance system in the USA was actually covert government stimulus spending in gigantic proportions.

4. Just like (some) economic theories would expect, this caused $trillions to be malinvested. The failure to notice this by ANYBODY (see #3) caused a most average citizens to drastically over-leverage since everybody thought this was actually the free market and "natural".

5. Today, we are deleveraging, and this is going to suck. Retirement plans in the USA are almost entirely based on primary residence and the government. Both of these were predicated on continually rising real estate values. Both of these are going to take a huge hit. This is going to suck NO MATTER WHAT ANYBODY TRIES TO DO.

6. Politically, nobody wants to admit what happened before, or is happening now, or what will obviously happen in the near future.

7. Keynesians are saying that we should be afraid of deflation, and we should revert back to the old tricks. They are wrong about the SECOND part.

8. The Right (which now includes the Whitehouse) says that we should be afraid of INflation, and that we should fiscally contract. They are wrong about the FIRST part.

***

So now what? Well, you have the entire Right-wing economic-thinking machine is absolutely committed to UNreality.

Instead of telling the truth, which is that our country's errors of the last 50 years are going to take a LOT of digging out and the correct expectation for the next 10-20 years is Japan-style deflation, they are twisting themselves into logical pretzels to make the case for imminent hyper-inflation when the reality is that there's no chance in hell of that happening when we are DELEVERAGING. Simple math: grandma's got an underwater house and less SS to spend--lower spending overall; Mom and Dad are busy SAVING right now because they don't want to end up like Grandma--lower spending overall.

In other words, "it's a huge shit sandwich and we all have to take a bite".

Since I have yet to hear a single pol get elected by using that rather memorable quote, we have lies instead:

1. Lowering taxes on the Rich will get us out of this mess--the Confidence Fairy will provide (lowering taxes won't help in the short-to-medium term AT ALL; businesses make decisions based on DEMAND, and NOBODY is "afraid" of Obama despite what some self-serving CEOs say).

2. Shrinking the government (aka laying off several million people in a comatose labor market) will get the country moving again (it will just expose more of the problem, and cause more pain).

3. Hyperinflation is just around the corner (2.3% 10-year treasuries = nobody with a brain believes you).

4. What just got our credit downgraded--the US is no longer credible (ditto--the market would beg to differ with what a couple of S&P managers trying to unelect a president might think).

5. Obama is a "socialist" who is rapidly turning the country towards totalitarianism (he just asked Congress to pass a TAX CUT--and he just helped slit the throat of Keynesianism by reversing his rhetoric and going from "stimulus to get things going" to "balance the budget with cuts and SOME new taxes").

6. This is all the Demo's fault (both parties were in on the covert stimulus--Bush II in particular doubled-down on housing).

7. Expanding the money supply means there is inflation (it does nothing when it just sits there).

8. The problem is immigrants stealing our jobs (yeah, whatever you do don't let anybody come here and live in that massive oversupply of houses we built).

9. Congress will just inflate the currency like they did in the 70s (completely different world, and even a slight bump in inflation expectations would make us INSTANTLY insolvent because of the increased borrowing costs--not to mention that it would start WWIII, literally, if we rip off the Chinese this way).

10. See! We had some inflation! (Based on oil prices -- and now that's reversing).

And others. The unspoken word is that any sort of falsehood is fine as long as it achieves the Prime Directive which is getting the other party (in this case the Demos) out of office.

***

Now if you think I'm making a case for Keynes, then you missed my point--and you are part of the problem.

When I was young, I imagined my special awareness of this particular body of ideas would help me change the world. Now that I'm older I can see that I need to make the most of the world I'm in--but I still have a wonderful advantage to be able to see things that others don't.

I think other Objectivists should do the same. We're deleveraging, and we ARE in the "deflation spiral" that all of the Keynsians are talking about. Read Paul Krugman and understand that most of his precepts are correct--even if his basic political premises are not.

And note that the political winds are blowing AGAINST the Keynesians now which means we won't have another temporary fix and MORE SEVERE deflation is on the way. The dollar is going to become HUGE. Goldbugs are going to get SLAUGHTERED. Borrowing--even at near-zero interest rates--will be DUMB. The current stock market downturn is because of lowered DEMAND EXPECTATIONS--not because anybody seriously gives a flying flock what S&P thinks.

Now I could be wrong about all of these predictions--everything I'm talking about here can cause a LOT of upheaval politically. But you can watch for that.

For now though, make sure you get the data you need to tell you what IS going to happen, not what you WANT to happen, or what you hope others will think will happen so the party you want gets elected. Stupidity and lies are not going to take us down the road of freedom--quite the opposite.

OP

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Good post.

I think the big reason that the "right" does not see this is that the right is basically monetarist. I think the reputation of monetarists was boosted by their association with Thatcher, Reagan and others (like the Chicago Boys of Chile). In the monetarists of the day, what one had was a set of people who were advocating the rolling back of statist structural controls. When politicians followed that advice -- even partially -- economies saw a boost.

However, one of the things the monetarists bring to the table is their idea of the "Quantity Theory of Money". The typical way this idea is promulgated makes it somewhat true, but only within a certain context. Ludwig von Mises warned against the Quantity Theory of Money's focus on the supply side of money, while it assumed the demand to be constant. Unfortunately, too many people think that if the FED creates more "high powered money", then that will lead to price rises. This idea misses the role of credit in the economy, and assumes that some type of "multiplier" works in a mechanical way.

I disagree that gold must move differently from U.S. Treasuries (and differently from dollars when seen against other currencies). The price of gold is a good measure of fear, but not just fear of inflation. It is quite possible, and even likely, that people will continue to get just a little more into Gold and U.S. treasuries, as they have been doing for the last couple of years.

Edited by softwareNerd
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There are a few good points in there as regards the failure of right-wing economics, but I have some criticisms:

1. Lowering taxes on the Rich will get us out of this mess--the Confidence Fairy will provide (lowering taxes won't help in the short-to-medium term AT ALL;

I know Krugman likes to use this phrase "The Confidence Fairy," but don't you think that's a bit of a straw man? The intention is to make it look like the factor of uncertainty is non-rigorous and has no rationale, but that wouldn't really be accurate, or a fair description of the opposing viewpoint. Krugman isn't exactly known for having the best record in regards to the ethics of discourse and controversy, so I don't think it would be a good idea to copy him on this.

businesses make decisions based on DEMAND, and NOBODY is "afraid" of Obama

Investors don't ever make decisions based on risk? Only demand?

despite what some self-serving CEOs say).

Ad hominem.

2. Shrinking the government (aka laying off several million people in a comatose labor market) will get the country moving again (it will just expose more of the problem, and cause more pain).

So the Keynesian diagnosis of the real problem with the economy is insufficient aggregate demand. "Big Government, run by people who understand its virtues" in the word of Krugman, is the solution in the form of massive deficit spending in order to fill in the gap. But advocates of austerity are ideologically driven to dogmatically recommend shirking the government by drastically cutting government spending and reducing the deficit.

But we should clarify, obviously the people who recommend shrinking the government and cutting spending don't think the problem is insufficient spending because of Say's Law. They (the Austrians anyway) think the problem is a structural one, i.e. that the structure of production was distorted during the boom phase requiring a correction process. Since we have very low private business investment, high unemployment, low consumer spending, and low growth rates after a period of massive overconsumption and malinvestment, the proper remedy is for households to save and businesses to invest in lines as indicated by the proper market rate of interest and consumer demand.

There are two points that result from this in regards to your comment:

1. Certainly, this will expose the problem and cause more pain, but the point is that failure to correct sooner rather than later will cause even more pain when the correction does come, the further out it is pushed.

2. You criticized about the "confidence fairy," but now we could say that there is nothing magical about government spending. Resources allocated via the political process are much less likely to satisfy consumer preferences than resources allocated via market processes.

3. There is the concept of crowding out to deal with, i.e. any reduction in private consumption or investment that occurs because of an increase in government borrowing. If an increase in government spending and/or a decrease in tax revenues leads to a deficit that is financed by increased borrowing, then the borrowing can increase interest rates, leading to a reduction in private investment.

In this sense then, shrinking the government can help get the country moving again by both restoring confidence and enforcing a desocialization that would help to stop the parasitic government sector using up financial and other resources that would otherwise be used by private enterprise for actual goods and services demanded by the consumers.

As far as the labor market goes, I think both neoclassical and Austrian theory would be in agreement on what the problem is there. On the unhampered market, anyone can find a job so long as he is willing to have his wages adjusted to his marginal revenue product, i.e. work at the prevailing free market wage. After the bust phase in the business cycle, unemployment will be aggravated due to the number of bankruptcies, but this will only be transitory unless there is intervention keeping the correction from taking place, thus keeping the economy in a high unemployment and chronically depressive state.

3. Hyperinflation is just around the corner (2.3% 10-year treasuries = nobody with a brain believes you)

It doesn't necessarily follow that people who predict hyperinflation are wrong because of "nobody with a brain" believes them. It could be that these investors are the ones that have no brain. That's why arguing like this isn't very convincing.

The argument for inflation does not really require twisting into any logical pretzels, just some very simple alternatives.

We are in debt such that there are two alternatives: We can have

1. default or major cuts to domestic spending (with the option of tax increases),

or

2. inflation.

Now, given the political context we are in, and given the nature of your very post, which one of these should we expect to see? I don't think these people (e.g. Peter Schiff) are saying hyperinflation is "just around the corner" right this second and they are ignoring everything around them. No, there are things that have to happen first according to these arguments. Namely, it's just that they are betting on the political class to deal with the actual situation in the exact wrong way, that inflation is the most likely outcome because it provides the means for the government to deal with this crisis because of its political palatability.

4. What just got our credit downgraded--the US is no longer credible (ditto--the market would beg to differ with what a couple of S&P managers trying to unelect a president might think).

Again, this is susceptible to the same kind of criticism as the previous point. If you're just attacking someone as stupid or not credible and no one agrees with them, it doesn't follow that they are necessarily wrong, for it could be that the people who disagree with them are wrong. If the market, including the other ratings agencies, were so credible then why did they miss the junk ratings earlier and fail to foresee the crises as well? How is it that consensus is being appealed to for credibility, whilst S and P is being attacked, but in reality both lack credibility. Why couldn't it be that S and P is learning from its mistakes and everyone else that is doing the same thing? You would have to show what's right and what's wrong in the first place, but why not just do that instead of attacking someone's motives?

9. Congress will just inflate the currency like they did in the 70s (completely different world, and even a slight bump in inflation expectations would make us INSTANTLY insolvent because of the increased borrowing costs--not to mention that it would start WWIII, literally, if we rip off the Chinese this way).

I don't think you've successfully dealt with the objection that we're not going to pay the Chinese back their money as that would require massive across the board tax increases and spending cuts on American citizens to pay back foreign governments. It is not politically likely, as the previous argument went. We are going to borrow more money to pay them back, and keep doing that until we run out of people to lend us money. If then, we run out of bidders for new treasuries, the Federal Reserve will be the only buyer, and that means we will repay in dollars of lesser value.

So if we already did this out of expedience in the past as you mentioned, why is it "completely different?" Because the Chinese will get mad? But they don't vote. Why would we rip off voters to pay back non-voters? A sense of collective responsibility? The American worker will likely not give a damn about the Chinese, just like the Greeks, Icelanders, Irish, etc. So why wouldn't we probably just accuse the Chinese of "predatory lending" or some such at that point to justify it?

7. Expanding the money supply means there is inflation (it does nothing when it just sits there).

[...]

10. See! We had some inflation! (Based on oil prices -- and now that's reversing).

If stupidity and lies are not going to take us down the road of freedom, then it's unclear how intransigently seeking the truth is to be best served by misrepresenting and being quite unfair to your opponents' position in this way.

Now if you think I'm making a case for Keynes, then you missed my point--and you are part of the problem. ...We're deleveraging, and we ARE in the "deflation spiral" that all of the Keynsians are talking about. Read Paul Krugman and understand that most of his precepts are correct...

But you are making the case for Keynesian economics, and condemning people who would support austerity a being part of the problem. So if that wasn't your point, then what is your point? It's not quite clear. Maybe you should rephrase this part.

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Gold at $1,800 an ounce looks a lot like inflation when ten years ago it was $275.

Others have pointed out various problems with the lead post. I add the following comment on this sarcastic/ironic remark regarding immigrants: “whatever you do don’t let anybody come here and live in that massive oversupply of houses we built.” Today immigrants by and large are Third World immigrants. Collectively (of course there are individual exceptions, but as a whole) they are a drain on the economy. In today’s welfare state they receive more government benefits than they contribute in taxes or contribute in other ways. To many of the rest of us stuck in this society that means the reverse, we’re on the contributing side of the holdup.

Again speaking in averages, though immigrants may take up space in a vacant house, the money they use to buy, maintain and/or rent that house comes partly from natives who are forced to give it to them.

Of course all our problems can’t be laid at the feet of welfare immigrants, but the self-righteousness displayed in the above sarcastic/ironic remark is unjustified.

A number of people claim to prove the pretty obvious (if you’ve ever lived in a big city) idea that today immigration is bad news. I don’t necessarily buy everything on the following websites but some of their economic articles seem to be worth a look. Each article below contains some evidence for the above:

http://www.fairus.org/site/PageServer?pagename=iic_immigrationissuecentersfa6e

http://www.numbersusa.com/content/nusablog/beckj/march-15-2011/why-does-us-restrict-h-1b-visas-protect-american-workers.html

http://www.numbersusa.com/content/learn/issues/american-workers/immigration-hurting-us-worker.html

http://www.newswithviews.com/Wooldridge/frosty545.htm

Chapters 7 and 8 of Alien Nation, by Peter Brimelow. A massivve PDF file of the entire book is at

http://www.vdare.com/asp/countLink.asp?u_link=http://www.vdare.com/alien_nation/Alien-Nation.pdf

The following article really got to me so I include it even though it’s about culture rather than economics and it combines immigration with other causes. Set aside the nonsense about the virtue of selflessness and consider the rest:

“ ‘This isn’t the Britain we fought for,’ say the unknown warriors of WWII”

http://www.dailymail.co.uk/news/article-1229643/This-isnt-Britain-fought-say-unknown-warriors-WWII.html

The ACLU has a contrary view, but don’t have much to back it up – quoting a political hack like Mario Cuomo would only convince a leftist. Other such articles quote the Farm Bureau and other government sources, not exactly unbiased. Here’s the ACLU article:

http://www.aclu.org/immigrants-rights/immigrants-and-economy

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The term "confidence fairy" is a great example of the problem I'm talking about, actually. It is the REPUBLICANS who are destroying this concept by applying it incorrectly. Paul Krugman is pointing out the narrow truth of the matter, and coining a term to do so. He's clearly not concerned with collateral damage here (destroying the whole concept?), but I'm personally not worried about that. If we can make the repubs stop, then the war on the concept will stop.

I read Krugman almost every day. Everybody should. I learn a lot, and my mind isn't at all corrupt. I'm actually just fine.

When Krugman says, "we're headed for deflation" because we're deleveraging, and the government is completely against his ideas, which will mean fiscal cutbacks--then there's nothing to argue with there. Sure, he goes on to say that the remedy is more temporary painkillers and stimulants, but you can ignore that part.

As for "crowding out", now you're doing the exact thing I'm criticizing the repubs for. Is it possible? Yes. Is it happening now, or threatening to do so? No, and nowhere on the horizon.

Now, how do you figure that debt at 100% of GDP for a nation that throws off as much cash as ours does (recall our military budget is still larger than all other countries combined) is so completely insolvent that utter catastrophe is the only possibility?

With borrowing costs at ~2% of GDP, this is certainly NOT so crippling that citizens are going to choose WWIII instead of just paying the bill. Certainly we've all got our crystal ball out here, but if I had to guess, I bet The People choose the easy way out and muddle along with austerity for another decade or two. Yes, we're on a ledge: even the slightest hint of inflation will reverse our situation and turn our 2% borrowing cost into 10%, and probably create a feedback loop that is inescapable. I'm pretty paranoid about our leadership, but NOBODY in Washington is saying ANYTHING even remotely inflationary right now--quite the opposite. We didn't have this kind of debt in the 70s, so inflation back then was merely "very bad" and not "armageddon". Besides China--who will probably repo South Korea if we screw them--our debt is largely held by savers here in the USA too, and yeah, they vote. Locking out a major buyer for our debt would also disrupt the market to the point where it would achieve the opposite (long story short, the confidence fairly for t-bills would be a raging bitch). And no, I actually do NOT think our economic leaders are THAT stupid. This is a judgment call, clearly, but that's my take on it.

So yeah, for my money, I think we've actually eliminated inflation as a possibility in this country until the debt is down to, say, 30% of GDP and IF it gradually becomes more closely held by a disenfranchised voting block who does not posses nuclear weapons. Impossible in the short run and implausible in the long run.

OP

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[...]

Today immigrants by and large are Third World immigrants. Collectively (of course there are individual exceptions, but as a whole) they are a drain on the economy. In today’s welfare state they receive more government benefits than they contribute in taxes or contribute in other ways. To many of the rest of us stuck in this society that means the reverse, we’re on the contributing side of the holdup.

[...]

Good point. Collectively, children are a drain on the economy as well--but that opens up a new question: how best to round them all up and eliminate them? This is a vexing problem indeed.

Seriously, what sort of racist drivel is this? The solution to the welfare state is to end the welfare state. This seems kinda obvious, but then again I'm not a racist.

OP

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We're deleveraging, and we ARE in the "deflation spiral" that all of the Keynsians are talking about.

With the official CPI at 3.5%, and the shadowstats.com corrected CPI at 7%, we clearly are not in a deflationary spiral.

For a more comprehensive rebuttal, see:

http://www.itulip.com/forums/showthread.php/20102-You-re-not-going-to-believe-this-Eric-Janszen

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The solution to the welfare state is to end the welfare state. This seems kinda obvious ...

OptimizedPrime needs to be more precise and less sarcastic. Which would he do first, end the welfare state or fail to close the borders?

Read the UK article “This isn’t the Britain we fought for” by Tony Rennell. It’s a review of the book The Unknown Warriors by Nicholas Pringle. If these people are racists then I’m in good company. The virtue of selflessness nonsense that some of those of the WWII generation repeat is pathetic when you consider that they really were sacrificed.

To get back on track, is the price of gold in dollars probably going down soon? I should trade my gold for hundred dollar bills?

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OptimizedPrime needs to be more precise and less sarcastic. Which would he do first, end the welfare state or fail to close the borders?

Read the UK article “This isn’t the Britain we fought for” by Tony Rennell. It’s a review of the book The Unknown Warriors by Nicholas Pringle. If these people are racists then I’m in good company. The virtue of selflessness nonsense that some of those of the WWII generation repeat is pathetic when you consider that they really were sacrificed.

To get back on track, is the price of gold in dollars probably going down soon? I should trade my gold for hundred dollar bills?

Only completely open borders are consistent with a free society. I recall that the allies were fighting for exactly that in WWII.

***

As for gold, don't take my word for it. Glenn Beck is a far better economist than I--he has a large stake in a Gold company and pumps the metal every day on his show. The price even passed the price platinum briefly, which makes perfect sense when you don't think about it.

OP

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With the official CPI at 3.5%, and the shadowstats.com corrected CPI at 7%, we clearly are not in a deflationary spiral.

For a more comprehensive rebuttal, see:

http://www.itulip.com/forums/showthread.php/20102-You-re-not-going-to-believe-this-Eric-Janszen

Okay, I read through that. The argument seems to be that, since the Government CAN inflate, it WILL inflate and far over-offset the multi-trillion dollar contraction caused by the housing price downturn.

Same argument, over and over again. It's trying to say that this is the 70s, and our government is going to CHOOSE hyper-inflation and destroy the world (which is what will happen if we have inflation in this environment).

But a potentiality is not an actuality, to coin a counter-argument from an entirely different debate.

I trust that Obama is not going to get out the launch codes and nuke Canada tomorrow. I trust the pilot flying the plane I'm on to not intentionally crash into the ground. I trust that the Fed is not a secret society controlled by Jews bent on destroying the world but rather a group of economists who are trying their best to do the right thing (even if they are wrong sometimes). I'm very trusting in this way.

This is a judgement call though. To each his own.

As for me, in the face of an obvious catastrophe, I don't expect the leadership in Washington to simply kill us all by inflating the money supply to the point of hyperinflation.

OP

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With the official CPI at 3.5%, and the shadowstats.com corrected CPI at 7%,...
I've never fund shadowStats numbers believable, because they do not square with my own experience. I doubt my expenditures are so un-typical. I keep a pretty good record of where I spend money, and I have not seen any huge price-effect in most categories. Healthcare has been the worst, with utilities also rising steadily (not surprising, since they're government sanctioned monopolies). I don't keep an index, but my estimate is that the price effect on my food budget has been about 4% for the last 10 years, with more of it coming in 2000-2005 than in the 2005-2010. The biggest expense for most people (after taxes) is lodging. Home prices are down, rates are down (many have refinanced). As for apartments in my area, rents went down during the housing boom, and are only back to where they were about a decade ago. Cars -- another big part of the typical family budget -- have seen a very small annual rise over the last twenty years that I've been buying them.

I do think we have seen a lot of (credit) inflation in the last 15-20 years, but the impact has been in asset prices, with no significant impact to consumer goods. Asset prices have seen the effects of money flowing into them (and out of them during a bust). This has led to stock prices and house prices going up for extended periods. Similarly, the rising price of gold is a sign of inflation, but it is not of the type that the CPI relfects.

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Okay, I read through that. The argument seems to be that, since the Government CAN inflate, it WILL inflate and far over-offset the multi-trillion dollar contraction caused by the housing price downturn.

Not just that it can, it has. If you don't like the shadowstats.com numbers, there's also the billion prices project, which also shows inflation is here. Plus, of course, the actual money supply figures.

Same argument, over and over again. It's trying to say that this is the 70s, and our government is going to CHOOSE hyper-inflation and destroy the world (which is what will happen if we have inflation in this environment).

It's a big leap from enough inflation to offset debt deflation, to hyperinflation. I'm not suggesting that, nor was the author of the article I linked to.

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Okay, so I guess "hyper-inflation" is just one possible outcome, along with "mild-inflation" (viz. like we've had in the past 10 years) and "deflation".

Like some others here, I simply haven't personally seen inflation ANYWHERE besides in volatile things like oil and other goods that tend to bounce around a lot. I did some research and found this:

http://autos.aol.com/cars-Toyota-Camry-2001/overview/ (2001 median price: 21950)

and

http://autos.aol.com/cars-Toyota-Camry-2011/overview/ (2011 median price: 25020, 1.32% CAGR)

Yes, anecdotal, but I have yet to find anything meaningful in my life that has gone up in price in a meaningful way. The biggest ticket items are the house (massive negative) and cars. So I too am rather skeptical of these inflation measurements--especially in light of the macro factors (massive deleveraging, high unemployment) and the opinions of many people with skin in the game (investors pushing 10-year bond yields down to 2.x%). Doing the above research reminds me that many goods have actually dropped dramatically in price because of trade (made in China) and technology--and this is an effect that is still going on.

This seems to be a lot of evidence that we're not experiencing any significant inflation, and without significant government will to do so, we won't.

And I refer to my remarks above about the current leadership "wanting" to inflate our way out of our debt. Implausible to the point of near-impossible.

That leaves either status-quo (very small) inflation, or deflation-spiral. I am betting on deflation because I am predicting a massive fiscal contraction which will be a deflationary factor we haven't experienced in this era so far--tipping us into deflation. Clearly if the political winds in Washington reverse, then so will my argument, but there's no evidence of that happening any time soon either.

OP

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... a free society. ... the Allies were fighting for exactly that in WWII.

The people quoted in the book and article know what they were and were not fighting for. You must listen to them to find out.

Unrestricted immigration is destroying America in many ways not the least of which is that the new immigrants tend to vote socialist – yes, even though they moved to escape the economic consequences of socialism. An Objectivist vote gets negated with each socialist immigrant.

About gold and inflation: Isn’t the rising price of gold an exaggerated indicator of inflation? Exaggerated because the rising gold price also indicates the fear of future inflation, which of course differs from actual inflation.

To my mind 4% per year constitutes high inflation. It’s a yearly 4% tax on savings and means the value of your savings gets cut in half every 17 years. 17 years from now you will need $200 to buy what $100 buys today.

Yet when inflation is at 4% politicians boast that it’s only 4% and “we got inflation under control” – as if 4% is no problem (and what problem there could be is never caused by them).

If the annual inflation rate is 5% it takes somewhat less than 14 years to cut your effective savings in half. With 6% it takes about 11 and a half years. Inflation is a major wealth killer long before “double digits” (10% or more).

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