Cut your cutting

The real problem: Economists are knuckle dragging morons.

Keynes won. \o/

Actually, I'm waiting to see if this Great Recession of ours will be a replay of the political episode of the Great Depression.

/me kicks Hymy in the gonads

<!-Quote-!>Quote:

Nice response L, good points on #3. The fed's easing will positively affect crowding, and I'm not concerned that much about private loan demand in the short term. However, the high debt levels along with all the recent legislation are creating a very uncertain environment, which discourages investment. I am expecting an inflationary environment here in the US next year especially food and oil, not a deflationary one, so we differ on that. It will be interesting to see how things pan out.<!-/Quote-!>

So, much for your worry about deflation Laguna. All prices are going up here in the US, except housing prices.

Okay. I confess, saying deflation is a bit over the top. Perhaps saying increases below their historical trends fits better, as some prices have a very strong downward rigidity. And that's what I'm seeing on core inflation. Core inflation excludes the energy and food categories precisely because these goods have extremely volatile prices.

Some of the increase in the price of oil is justified, because of the drop it had in the bloom of the Great Recession, motivated by low prospects of demand - you consume less energy in a recession. As recovery settled in... you get the picture. But recovery is stronger in the emerging markets. As the economy cools over there, so will the pressure they are making on commodities and therefore inflation as well.

Plus, this all looks like a temporary surge in inflation.

Laguna, you make a wonderful argument my friend.

The points that I am not seeing in this discussion to date are regarding Capital Flight and Declining Real Wages.

The second, first.

Since the early 70's, real wages in the US have been consistently trending lower than rate of economic growth. There were several factors, initially, including the Baby Boomers and more women enterring the work force en masse, increasing competition for jobs and depressing aggregate wage levels, as well as the European and Japanese economies finally hitting their Post-War stride and claiming their competitive share of markets.

However, consumer spending was encouraged and relentlessly driven by both public and private entities regardless of consequence or reality.

The explosion of private consumer debt began with home equity financing and has progressed through unsecured credit card debt as Americans' ha