Deflation, An Economic Nightmare

timwilliams By timwilliams, 13th Jun 2015 | Follow this author | RSS Feed | Short URL http://nut.bz/3s66-kbw/
Posted in Wikinut>Money>Economics

Why deflation is so devastating for any economy especially the US economy.

Deflation, An Economic Nightmare



Many confuse the term deflation with inflation. In economic reality deflation occurs when there is a contraction in the volume of available money or credit that results in a decline of general price levels. Keep in mind that deflation is more damaging than inflation in that it creates a downward spiral in which the expectation of falling prices reduces demand and pushes prices even lower as it happened in 1929. When there is a decline in prices and still no one can afford to make purchases deflation is the end result. This is often caused by a reduction in the supply of money or credit. Deflation can be caused also by a decrease in government, personal or investment spending. The opposite of inflation, deflation has the side effect of increased unemployment since there is a lower level of demand in the economy, which can lead to an economic depression. Central banks have attempted to stop severe deflation, along with severe inflation in the past but are failing miserably today. All the Fed has done has accelerated deflationary trends in every Quantitative Easing policy they have made. Today, some may point out that there is juggernaut of financial calamity steaming toward the economies of the world. The reality facing the world today is that we are all precariously close to falling into another Great Depression.

It has been 83 years since the Great Depression and yet history is about to again repeat. Through lust, greed and a total disregard for morals has corrupted and corroded the economy of the worlds industrialized nations. Many would have thought that with the coming of the 21at century man would have risen to greater heights in eradicating poverty. But, the exact opposite has occurred. Today their is more widespread poverty all across the globe that has not been seen since the 1930's. Still some analysts seem to think it is inflation that is making a big comeback. Their reasoning: Interest rates have started to move higher, hence, inflation is lurking out there. But, they're clueless just like our legislatures. These so called analysts are confusing declining bond prices (rising interest rates) with normal times. Normal Times! Just what is normal today?

It is true that interest rates all over the globe are inching upward and bond prices are sliding, most notably in Europe. But, that really doesn't mean inflation is coming back. We are failing to recognize that a sovereign debt crisis is fast approaching. That final point in time. That day of reckoning where many investors and now many economists have begun to realize that Europe, Japan and the United States are just plain bankrupt and will never really make good on their debts. What we are seeing today is that the US and many countries in Europe are doing everything they can to chase, track, tax and even seize one's wealth just so they can keep the illusion that they are remaining solvent.

The reality today is that more taxation is taking place all through-out Europe and Japan. Income tax hikes are now on the way for every American. Government surveillance is rampant. We have now experienced banks only allowing limited withdrawals. And in many cases seizures of accounts for no apparent reason. In Europe for instance they have enacted extensive capital controls. In France business can no longer use cash. Similar controls over peoples money already exist in Greece, Cyprus, Italy and Spain. This is just some of the moves by governments to cover up the fact that practically every industrialized nation is really in deep financial water. Intentionally, we are seeing governments distracting the general public from the harsh reality that is about to land right in our laps by all the other distractions that is occurring all around the world. The US government is no exception either.

There are plenty of signs of other Global instability aside from the civil war in Syria, the conflict between Russia and the Ukraine, and the ISIS terrorists. By the way the US as only added fuel to the fire with our imposed sanctions against Russia. China is pursuing aggressive action in the South China Sea. In Europe the number of separatist, anarchist and even neo-Nazi groups are gaining in popularity. This is true even in the United States where we have seen an increase in separatist movements. And, considering the top 1% as well as banks they all have been hoarding their wealth. This is deflationary.

Other disturbing factors that pin point the US is facing almost the exact economic conditions of the 1930's. When you take a real close look at the stock and commodity market trading volumes are less than half of what they were in 2007. Other factors to consider are the year-over-year change in U.S. retail sales. Retail sales for years have been declining. U.S. consumer confidence has fallen in every year since 1999. Quarterly, the U.S. GDP has been in declining along with consumer confidence since the last year of the 20th century. US industrial production has seen steady if not drastic cuts in production for years now. Many in the media and our esteemed leaders of state continue the emphasize that all is well and good in the economy today. When they tout the job numbers and the efforts of the Fed keeping interest rates low they all fail to recognize the harsh realities facing our whole economy today. Compounding this quandary is the fact that our national debt is so immense that day of reckoning is just around the corner.

In the big picture taking a look at commodities we find that Gold has gone from a record high just a few years ago and now along with gold silver has seen a sharp decline in value. In basic terms when the dollar is strong like it is today gold and silver loose value. The flip side when the US dollar is weak like it was just a couple of years ago the price of gold soared. In regards to the inflationary trends we have seen in the past those rising prices especially with the cost of food and energy now have diminished our chances to capture good living wage jobs are now compromised for capital garnishment.

As the price of gold rose throughout the past decade we’ve been inflating, no matter what the more quiescent government measures of consumer prices have been telling us. Until recently the US dollar was losing value. With a weak dollar really explains the reality of diminished capital. But, now with a strong dollar the capital infusion should be pumping into our economy but it isn't happening. Banks, big business and the 1% are all hoarding their wealth. Hence we have gone from an inflationary trend right into a deflationary trend and are real close to a full blown depression. An economic nightmare is soon to be unleashed upon the US economy and the rest of the world.

The question remains is it already too late to stop this impending catastrophe? Maybe, then again maybe not. But, only when government recognizes the hard cold facts and understands that radical reforms must be implemented in order to prevent this nightmare from crushing the economy and leaving millions so destitute. The best chance to eliminate this costly financial disaster is to ratify National Economic Reform's Ten Articles of Confederation

Tags

Financial Markets, Inflation Vs Deflation, The Economy

Meet the author

author avatar timwilliams
I am a feature writer for The Tampa Bay Examiner and The American chronicle. Earned Ph.D in Economics

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author avatar Carol Roach
16th Jun 2015 (#)

yes it is a very unsteady economy we are all facing.

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