Deflation fears (1 Viewer)

[S.H.O.D.A.N.]

Inflation falls to 1.5% - below the Central Banks target rate of 2% to 3%.

Inflation hits seven-year low, could influence rates | Business Breaking News | News.com.au

 

[withoutaface]

+1.5% isn't deflation. Not even close.

 

[Riet]

Even if there was deflation, so what? Would that not be because the currency is overvalued at the moment?

 

[Lentern]

Even if there was deflation, so what? Would that not be because the currency is overvalued at the moment?

I was thinking that too, low inflation or slight deflation would reflect the rate of growth which is what it should do. It means the economy isn't growing but I think we've all come to accept that. Far more worrying would be if we were growing and it was deflating, or we had stagflation.

 

[Omnidragon]

We'll be fine - if it deflates it probably makes things more affordable for people especially the people who were never able to afford anything and are therefore all cashed up.

But probably won't happen as long as the Govt keeps paying out $900 to dead people and prisoners, as well as guaranteeing house mortgages etc. At this rate they'll probably print more money to pay off all this debt that they've accumulated in a few short months that we'll experience hyper-inflation. Now that would be a serious concern.

Orwe could always borrow from our friends the US and UK. Oh forgot, they're in more debt than we are.

 

[Lentern]

Deflation is a good thing. It's nothing to fear. If we had sound money, we would have perpetual deflation.

1.5% inflation is not low, it is probably higher due to the RBA's flawed measurements, and any deflation or low inflation is likely to be short lived.

Artificially low interest rates and rapid money creation are the definition of inflation, and ultimately they will show up in the RBA's statistics through rising consumer prices.

Well it's not entirely a good thing but in these circumstances there is nothing wrong with it. Over a long period though its a problem. A steady inflation rate will mean money not spent is money losing value, it promotes healthy levels of spending, the market produces more to match it and people are employed. Deflation actually incentavises spending saving because money standing still is gaining value and over a long term inverts the effect of steady inflation, higher saving, demand goes down, supply goes down, people lose jobs. At the moment however the problem is partially we consume more goods then we produce capital so deflation should actually correct that to an extent.

 

[S.H.O.D.A.N.]

+1.5% isn't deflation.

Correct. You probably need to look up the definition of 'fear'.

Not even close.

Rubbish. Any period of dis-inflation below 2% inflation is certainly 'close'.

I don't believe Australia will experience deflation, but the trends in the inflation rate over the past 2 years have been amusing.

 

[Lentern]

Arrrrgh. Wrong. People saving money is a good thing. We have a recession because we didn't save, we just consumed.

You even mentioned the long term. Increasing consumption in the short term may have a stimulatory effect. However, in the long term, the only way an economy can grow is through saving and investment, not consumption and debt.

We had a recession not because we spent as opposed to save but we overspent. Capital sitting in the treasure chest is capital doing nobody any good. Spending credit is dangerous I agree, it should be discouraged but spending money you actually have is good economics.

 

[S.H.O.D.A.N.]

We had a recession not because we spent as opposed to save but we overspent. Capital sitting in the treasure chest is capital doing nobody any good. Spending credit is dangerous I agree, it should be discouraged but spending money you actually have is good economics.

Actually, we had a recession because Europe and America, two of the engines of the global economy, crashed and burnt.

Perhaps Australia would have eventually run out of steam had things continued as they were, but our savings and spendings were actually in much better shape than Zimmerman will ever give them credit (hah) for, and still largely are.

 

[S.H.O.D.A.N.]

We had a recession not because we spent as opposed to save but we overspent. Capital sitting in the treasure chest is capital doing nobody any good. Spending credit is dangerous I agree, it should be discouraged but spending money you actually have is good economics.

Actually, we had a recession because Europe and America, two of the engines of the global economy, crashed and burnt.

Perhaps Australia would have eventually run out of steam had things continued as they were, but our savings and spendings were actually in much better shape than Zimmerman will ever give them credit (hah) for, and still largely are.

 

[random-1005]

Even if there was deflation, so what? Would that not be because the currency is overvalued at the moment?

wtf is this, is it somehow cool to have politicians as your display picture (and also the post below this with brendon nelson), lol theres a wanker at my school that does that

 

[Omnidragon]

Arrrrgh. Wrong. People saving money is a good thing. We have a recession because we didn't save, we just consumed.

You even mentioned the long term. Increasing consumption in the short term may have a stimulatory effect. However, in the long term, the only way an economy can grow is through saving and investment, not consumption and debt.

Agreed. Economies have grown on the back of enormous amounts of credit. It's fine until it busts.

But look that's not the point. Even if we were spending savings is that necesarilly a good thing for individual well-being? To take an extreme argument, if it is, shouldn't everyone be encouraged to have $0 in the bank? We all understand (at least the bankers and economists should) that $100 spent can generate some $500-$600 GDP. But what does that mean for individual well-being?

 

[Lentern]

Actually, we had a recession because Europe and America, two of the engines of the global economy, crashed and burnt.

Perhaps Australia would have eventually run out of steam had things continued as they were, but our savings and spendings were actually in much better shape than Zimmerman will ever give them credit (hah) for, and still largely are.

You kind of acknowleged it but anyway we might not have had overpsent to the same extent as Europe and America but we still had the same flawed economic philosophy of financing debt with debt.

 

[S.H.O.D.A.N.]

You kind of acknowleged it but anyway we might not have had overpsent to the same extent as Europe and America but we still had the same flawed economic philosophy of financing debt with debt.

I know, and in the long run I support the argument that we should spend within our means.

 

[aussie-boy]

I dont see how deflation could be good... wouldnt everyone just stop spending, with the knowledge that they will save if they buy 'tomorrow'??

 

[S.H.O.D.A.N.]

I dont see how deflation could be good... wouldnt everyone just stop spending, with the knowledge that they will save if they buy 'tomorrow'??

In theory. Western countries are somewhat safe though because people are well off and ingrained with a capitalist mentality. I doubt a period of deflation would last long unless there were deeper problems at play.