Disinflation, deflation and the nuclear button option - View from Dublin, Opinion - Belfasttelegraph.co.uk
I haven seen this mentioned anywhere else. It seems the amount of money in circulation in the country fell by over 2% in the past 12 months. This happened in the 1930s during DeVs Economic War, but probably not since.
Interesting times.
"Who will bailout the IMF after FF is finished with them?"
We've been talking about it on the Pin since August! Sheesh, when are people going to realise that the media in this country is completely clueless?
Je suis un loo-lah
hmmmmmm that is interesting, its inflationary part from anything elxse, and aalso backs up the beliefe of people that lots of people are shopping in the north...its a very very bad sign for the economy.
You mean deflationary.Originally Posted by sandar
nope its inflationery in the long term, and deflationary in the immediate term. Its deflationary because if their is less of it in circulation people will spend less, forcing prices down.
But in the medium term it leads to inflation, the more scarce something is the more value is attached to it, as greater value is attached to money, then the amount of goods needed to exchabge for money will increase causing prices to increase.
The less money that banks have to lend the higher the interest rate on that lending will be, businesses who are paying back loans will have to put up prices to pay for tghis.
You would expect it to be deflationery on a macroscopic level but it may cause some price rises as demand contracts some businesses will raise prices to cover overheads.
It would depend on the price elasticity of the good in question.
Its hard to know what is happening. Will Hutton had an article in the Guardian calling for a Geman style economy for the UK allied with Brown's fecless monetary and fiscal policies (obviously he did not see it as feckless but a return to real labour)
He seemed to fail to understand that the enduring strenght of the German economy has been based on fiscal conservatism and the fact that recessions are an inevitable fact of the free market.
People suffer in a recession, but in a well structured economy people survive until the next period of moderate growth.
What we have in Ireland is boom and bust on a grand scale. There will be no recovery until the banks are sold to the lowest bidder and the entire property market is devalued so first time buyers will spend their money on something other than trying to fill a bottomless pit on the banks balance sheet.
Lets face it, the banks have gone bust - they are no longer a going concern - lets sell them off and let someone who understands banking purge them of the toxic debt. We could then let the market reassert itself after a decade of misplaced government intervention (as opposed to regulation which would have been useful)
House prices at 1/3 to 1/2 the current amount would allow people to start spending again.
People who have bought large amounts of investment properties should not be treated differently to people who bought bank shares or shares in Nasdaq companies. The fact that they are now holding our prosperity to ransom is unacceptable.
Falling house prices would allow government to cut the public sector wage bill without impoverishing young people starting out.
That's why the deflation happens! Money gets scarcer and money increases in value, in other words the money price of goods and services fall ie deflation
Consumers also face higher interest rates, also don't forget that real income is falling because unemployment is rising. So in order for businesses to be able to increase price what they're selling has to be both price and income inelastic which very few goods are I can only think of rice, corn and maybe potatoes being both and not all of them would be in the Irish market. So I can see no way that a credit crunch can lead to inflation. Once credit becomes more freed up and/or employment rises then prices will rise of course but that's very long term.The less money that banks have to lend the higher the interest rate on that lending will be, businesses who are paying back loans will have to put up prices to pay for tghis.
In fact deflation usually only causes more deflation (until something intervenes). Putting it simply it is because he saw a scenario where the market wouldn't intervene to end this spiral by itself that Keynes thought governments should intervene by spending money on public works.
How much would be explained by builders emigrating & Eastern Europeans returning home ?
More worrying is it mentions the velocity of money is falling
CyP
"Yawn , am I alive yet ?"
Figures mentioned on the Pin suggest that around half of the missing cash this year is Eastern Europeans sending money home.
The other half is another matter though.
Then again, all throughout the last 7 years or so vast sums of money were being removed from the economy every single year. This massive theft was covered up through the injection of vast amounts of fresh debt....on wildly overpriced shoeboxes in Westmeath mostly.
Je suis un loo-lah
Like seos said, I'm afraid that this is a fail... more goods needed to exchange for the same amount of money = decreasing prices.
Here's a fairly short explanation of the functions of deflation (defined as a reduction in the supply of money or money substitutes) I hope some of you will find interesting:
http://mises.org/books/deflationandliberty.pdf
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