I always have deflation problems, but now I carry the pneumatic jack and
cordless impact wrench, and my tire plug kit and compressor. And a couple of
spares, and a high lift jack. It all helps, but it can't fix the weather
that always seems to occur when deflation occurs.
In my opinion:Inflation is good for the borrower, his higher
earnings pay off debts with less labor.Defflation is good for the
lender, the borrower must pay off debts with more lavor.
Inflation was at it's very lowest during the Great Depression of the 1930s.
It reached a low of -11.32% in 1932.. Is that a good thing?Why would anyone want to re-create this anarchy?
Deflation has some risks that weren't mentioned by Mr. Samuelson.Some people buy cash-value life insurance. The way those products work
involves the insurance company investing a large part of each premium paid into
a diverse investment portfolio.But every policy is sold with the
expectation that the insurance company will be able to successfully get the 6%
(or so) expected return so that it can credit the policy with the 4.5% (or so)
that it guarantees so that it can meet the policy's face value.A very long time at very low interest rates, negative rates, or in a
deflationary environment can cause insurance company failures, because the 1.5%
difference between the 6% and the 4.5% goes towards paying employees, generating
returns for stockholders, and everything else. Without that, they're
doomed. It already has happened in Japan. They had a bunch of insurance company
failures in the 1999 - 2001 time frame. It could happen here too.
But the scary part isn't that it could happen. The scary part is that the
policies with the highest "guaranteed" returns are the shakiest.
Deflation is here to stay. And, the percentage of deflation will eventually
increase.Why? Because birth rates are at a sub-replacement level,
and continue to decline.The cause of deflation can be understood as
a simple demand to supply available issue, as ever fewer babies are being born,
so the products and services typically sold to parents with babies aren't
reaching high enough to satisfy the supply of goods and services. And, in order
to try to reclaim that lost demand, prices are going down as competitors for
given products and services want and need that business. But can't get it,
because fewer and fewer babies are being born.And since babies that
were born 5 years ago, and also 5 years before that, etc, etc, demand continues
to decline as the age of people goes up year after year. This
eventually should have its effects on real estate. However, with massive amounts
of illegal in-migrating, entering the US through Mexico, demand for housing is
by that means still rising.So, if we stop all illegal in migration,
then we better be ready to anticipate the consequences of what we want. Hence, we better be ready to receive what happens when populations quit