Deflation concerns mount

"the basic thing you worry about in a period of high deficits is inflation."

Who is 'you' ? Oh yeah, Creditors.

Funny thing about Economics. If you ignore enough data then what's left can prove anything.

As I've mentioned, under ObamaLogic we could have an individual mandate for the purchase of anything -- figs or boondoggles, for example -- and fix the entire economy right now. All we need is a strong, central government to enforce such individual mandates.

Cigarettes, for example, are popular worldwide and if we just mandated that every US citizen buy at least one pack each day, the deficit would be reduced by the increased tax revenue, more tobacco farmers would be employed and less dependent on subsidies, and the added consumption in the US would force export prices up thereby reducing the trade deficit.

Economics is easy if an individual mandate is available to a strong, central government willing to vigorously enforce its policies despite the will of the governed!

I think what I'm looking for is some sort of explanation as to how the supply of money is controlled. Now that we're in the digital age, how is money being controlled? Is there a digital maximum to go along with the physical maximum? Or are we just relying on the power of the auditors to prevent magic numbers from creating extra bucks?

rmgregory, don't give them any ideas.

The Fed (like all bankers) love austerity, including low inflation and high interest rates. But, the risk of austerity measures is deflation, so the Fed must walk a tightrope -- my observation is that the Fed has been "winning" the monetary tightrope game now for a while (especially under Greenspan and the early tenure under Bernanke), and it is therefore due for a loss -- the sooner our government takes seriously the signals that I am seeing (very high unemployment, low consumer spending, weak exports, overseas warfare, a rising class of "landed gentry" in government employment, and excess manufacturing and service capacities), the sooner that we can get started with inflating the economy back into prosperity. By the way, inflation (or "printing money") can decrease the national debt and rout entitlements about as well as austerity and default, so yes, inflation is not all that bad of a way to go forward -- it's time to startup the presses -- I hope the Fed knows what they are doing -- but, I also know that the people who run the Fed are no brighter or better informed than we lay economists -- the risk of deflation is real, and as long as the Fed and other bankers have their way, austerity measures will be popularized until it's too late to reverse -- the good news is that if we do get deflation, then I am certain we will see hyperinflation soon thereafter -- that's the way these things go, at least according to history -- more at:

http://wjmc.blogspot.com/2010/05/using-inflation-to-reduce-public-debt.html

My best advice is to prepare for inflation, sooner or later...

Economics is easy if an individual mandate is available to a strong, central government willing to vigorously enforce its policies despite the will of the governed!

Gee, didn't Obama and the congress get elected by the will of the people (ie historic majorities in congress and a win bigger than Bush's two "victories". We don't govern by referendum.

"Obamalogic?" Really? That's the best you could come up with?

Does anybody really believe that this administration is all about forcing people to buy stuff?

Dude, health care passed. Get over it.

"higher short-term deficits as the government spends in order to kick-start private demand."

Another way to say this is...

higher short-term deficits while the government creates so much regulatory uncertainty, private businesses fear hiring or expanding which depresses demand.

The basic thing you worry about running high deficits is not deflation, it's PAYING BACK THE MONEY. We already are going to be paying a huge % of our tax dollars on this debt. More debt means less money for things we want in the future.

Ezra, and other deluded types are only seeking out the nutty economic theories that give more power to the state and justify his collectivist agenda and equal outcomes social policy.

I found the 0.9% figure for May puzzling: that's a lot just for one month. It turns out this figure is comparing May 2010 with May 2009.

And staticvars: yeah, your heroes are evidently Hoover and Mellon, the dynamic duo whose policies took an economy with under 5% unemployment in 1929, and managed to improve that number to 23% by March 1933 when Roosevelt was inaugurated. Please explain how you pay for government services and pay down the debt in a deflationary economy with plummeting taxes. People without jobs don't pay taxes. They also don't buy the goods and services the economy produces which leads to more layoffs.

Or are you like Michelle Bachman who thinks everything was just wonderful until Roosevelt took over in 1933, and he got in his time machine and messed things up in 1929?