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USA Today Declares Deflation "A Problem"

Discussion in 'Political Discussion' started by PatriotsReign, Dec 4, 2008.

  1. PatriotsReign

    PatriotsReign On the Roster

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    Well, well, well...deflation is not good after all. Seems I've debated a few good men over this very issue. Well, I'll just show you a bit of the article and post a link so you can see for yourselves...that deflation is not good. It's not a good sign and it's not good for the economy.

    "Everything is on sale. And that's not a good thing.

    Consumer prices in October fell at the fastest pace in more than 60 years, sucked down by the rapidly deteriorating economy. The prices of oil, food, cars, clothing and electronics have all plunged. Home prices continue to swoon and so do stock prices.

    As the early reports from the holiday shopping season suggest, the nationwide fire sale might seem like a boon for consumers. But it's increasing the risk that the economy could become mired in a dangerous deflationary spiral — a widespread, sustained reduction in prices. That's something that hasn't happened here since the Great Depression."


    Deflation: Bargains abound, which could be a problem - USATODAY.com

    Another note regarding home prices.....

    "Home prices need to drop to affordable levels, and they will regardless of how much money Congress wastes trying to stop prices from falling."
  2. MrBigglesWorth

    MrBigglesWorth Rookie

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    Black Friday every day.

    Not many people are buying much so it's turning to depserate times.
  3. PatriotsReign

    PatriotsReign On the Roster

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    I know I've been beating this topic to death on this board. but what is happening is so historic I find it difficult to resist posting this stuff. I wish our economy just kept going the way it was in 2005...if that had been possible. but unfortunately, our economy never has been all bright skies...nor will it ever be that way.

    I guess it's kinda like life.
  4. MrBigglesWorth

    MrBigglesWorth Rookie

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    too much greed and people are addicted to possessions so they never saved for a rainy day. well it's drizzling now and it will soon be downpouring
  5. weswelker#83

    weswelker#83 Rookie

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    2009 Recession Will Be Severe: There Is a Global Deflationary Risk, Roubini Says: Tech Ticker, Yahoo! Finance



    He means drop down the loan amount to affordable levels.

    So if you bouhgt at the peak of the bubble for 600K, Roubini is calling for the banks to drop the loan amount down to an affordable payment.

    So if a homeowner can only afford a 300k house, the banks should drop the loan to 300K so the owner doen't get foreclosed on. If we need to inject more capital into the banks in order for them to handle these losses and get home prices lower than so be it.

    Many on Wall St. are calling for this. Sadly, its the only solution I see to this mess.

    Housing values must fall back in lines with income and the losses need to be taken by the banks. This could last decades if we don't do something like this. I know it sucks and is unfair blah blah blah. It beats the alternative of losing the financial system. We need solutions.

    I think Roubini's ideas are pretty decent. Lets face it, there is no good way out of this.
    Last edited: Dec 4, 2008
  6. Run DMC

    Run DMC Rookie

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    #24 Jersey

    Hi PR. Will you stop beating this dead horse?!!! :deadhorse:Just kidding. :D I was looking at home prices on realtor.com for a couple of areas I am very, very familiar with. #1 Tampa, Fl, #2, Westerly, RI. In Tampa I saw a 1300 sf condo for sale in South Tampa(the trendy section) that I almost bought 5 years(new) ago before the real insanity began. It was $215k pre-construction. It was listed for $375k! My parents bought a 1200sf condo in Westerly, RI 10 years ago for $105k. These same units are going for ~$250k, that is after coming down 5-10% since the "deflation" began. What's wrong with this picture? I don't think housing prices in white, upper middle class areas have dropped much at all. 5-10% maybe. That's peanuts after running the way they did from 2000-2007. Housing prices need to be 3x average annual incomes, even in desirable neighboorhoods. We are no where near that in those 2 areas I have mentioned. I have also noticed food prices haven't budged down one bit that I can discern. All of the increases that came with oil at $145/bbl still remain. So what is deflating exactly?
    Last edited: Dec 4, 2008
  7. PatriotsReign

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    When deflation or inflation is disussed, it's on a national level. Home values have certainly declined a lot nationally. In my area (plymouth/bristol counties) in MA, home values have come down somewhere around 15%+ and the prices seem to be suddenly dropping dramatically.

    I've been in the consumer products industry my entire career and focused mainly upon "food" products. I can assure you that most food prices increased very little over the 25 years I've been doing this. Suddenly they did increase significantly when gas/oil went up and have not come back down. Why? Because food retailers are doing GREAT right now. Keep in mind that the retail food industry is "recession-proof". When times are tough (like now), people eat out less and cook at home far more often and thus spend more at food grocers like Kroger & Safeway (or Stop & Shop locally).

    when you factor in the huge declines in the price of clothing, televisions and automobiles, you can see why deflation is occuring.
  8. Run DMC

    Run DMC Rookie

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    #24 Jersey

    15% decrease after a 200% increase? That's nothing. And it is not my imagination that food prices have not dropped? So, they're making a nice profit in the food industry? That just warms my heart. No offense. So, after doing a little more reading tonight, I have concluded the price of electronics, apparel, and gas and some crappy real estate has dropped in some less desirable (read: minority/poor) areas has dropped. Meanwhile, these douchebags in D.C. and Wall St. are pulling out all the stops to keep this housing bubble inflated so I can pay 6x average salary to live in a nice(read:white/affluent) neighborhood. Until I see housing prices in more affleunt areas dropping significantly, I am not buying it.

    From this site:
    http://www.thoughtrocket.com/blog/f...ncial-crisis-financial-statistics/2008/10/09/

    Here are some startling statistics that make our financial crisis all too real:

    2/3 of Americans believe their children will be economically worse off then they are.
    Profits are at a 40 year high for Fortune 500 companies ($705 billion) nearly 2X previous high.
    And worker productivity is up 48% between 2000-2006.
    But average wages only up 1% (inflation adjusted) (Bureau of Labor Statistics (BLS)).
    Median personal income is actually down, below 2000 levels (BLS), and also below 1977 levels in real dollars! The real median income in 1977 was $51,223 (inflation adjusted). In 2006 it was $50,700. (National Center for Education Statistics (NCES)).
    Virtually all income gains have gone to the richest Americans, the owners of capital and senior management compensation, which is now an incredible 400 times the average employee wage.
    We live in a country of 300 million people in which the richest 3 million own more than the bottom 256 million. 1% owns more than 90% of us put together!
    The cost of housing, health insurance, and education is rapidly rising. Prices in real terms of housing, education, and health care have risen nearly 300% more in the past 30 years, while individual incomes are stagnant.
    The amount of monthly income it takes to buy a house today is nearly 23% vs. 17% in 1970. People who pay 50% of their income for rent or mortgage payments are at an all time high.
    The average home price adjusted for inflation in 1970 was $115,000. Today it’s 2X as much in real dollars ($219,000). In many markets it’s 4X more (475,000+).
    Private college tuition and public tuition is up nearly 300% (College Board).
    The average debt of a college graduate is nearly $20,000+ (College Board).
    A majority of Baby Boomers expect to work beyond age 65 because they can’t afford not to.
    47 million are medically uninsured. Most are in families with at least one full time worker.
    In many communities, teachers, policemen, and firefighters cannot afford housing.
    Medical Insurance Premiums of an average American family exceed $1000 per month.
    Loan defaults and foreclosures are doubling monthly in many parts of the country.
    In Cleveland, Ohio nearly 10% of the homes are vacant and abandoned due to foreclosure caused by job loss.
    Retail sales are declining due to increase costs of gasoline, insurance, and housing.
    The savings rate for the average American 30 years ago was 9%. Today it is at zero.
    America has fewer manufacturing jobs (14.3 million) than it did in 1950 with 2 times the population. (In 1950 there were approximately 150 million Americans; today there are approximately 300 million. )
    Since 1977, inflation-adjusted medium income for U.S. males has declined 7.5%.
    U.S. productivity in terms of output ranks 8th behind Norway, Belgium, France, Ireland, Italy, Austria, and Germany (OCED).
    U.S household debt exceeds $12 trillion.
    U.S. Federal Deficit is $8.8 trillion! And climbing every second.
    Last edited: Dec 4, 2008
  9. Lifer

    Lifer Banned

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    Im waiting for houses to sell at $700. that would be COOOOL.

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