Deflation and You (TheAutomaticEarth)

MONDAY, AUGUST 16, 2010

August 16 2010: Deflation and you: Acting perfectly sensibly

Lewis Wickes Hine Where the money goes to May 1910
"Newsie buying candy with his hard earned cash in Bach branch office, 4020 Manchester Street, St Louis, Missouri"

Ilargi: It's been quite a while since we had a guest writer at The Automatic Earth, we should have more of those. Hint. Today, in any case, we do have one.

Aaron Wissner is a long-time Automatic Earth reader who also runs his own blog. Accidentally, Aaron is also busy organizing a series of Stoneleigh presentations of "A Century of Challenges" in the state of Michigan, which will take place September 10-19. We will post exact times and venues as they become available. And for those who can't attend, we are working hard on the completion of the video presentation of the talk. It should be ready within weeks, and we’ll post all details prominently here.

Both Stoneleigh and I were quite smitten with Aaron’s essay below. It provides a fresh angle and point of view of what deflation means beyond the usual lofty macro-economic terms that we usually phrase it in. At the same time, it may explain to people who tend to shy away from lofty terms what deflation is and where it originates.

Perhaps I can ask Aaron to do a follow-up dealing with what the consequences of deflation will be down the line. If he has the stomach for it, that is, because it would involve painting very scary pictures.

As a sort of lead-in to the essay, here’s a picture of a poll that the Guardian newspaper in Britain runs at present. It's all about sentiment, the same sentiment that Aaron talks about, as you will see. Funny, in a cruel sense, to see the discrepancy between political and industry messages vs what people in the street think and feel and fear. Even Tony Robbins has a video out (see below) warning people of a "major retracement". The Wall Street Journal runs an article entitled Boomers Threaten Economy, talking about who's spending less, or not at all. Which fits in perfectly with today's guest post.

In a side note, the greatest and most galling finance news today has got to be that the FHA, which guarantees about a third of all new US mortgages these days, is clamping down on the low side of the market, while at the same time guaranteeing multi-million dollar condos in Manhattan with taxpayer funds. Everytime you think you've seen the craziest moves of them all, you're already behind.

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