They say that if you ask five economists about anything you'll get six different opinions. I think that old aphorism more or less sums up the mess we are in at the moment. With all the brain-power and experience at capitalism's disposal we have managed to screw up the whole global financial system. It beggars belief.
I was also astounded to hear that we might actually end up with deflation in the economy. Apparently this is even worse than inflation. I just don't see it. Petrol prices are deflating at present. I don't see much of a problem in this. Food prices will probably deflate too. Good. Energy prices - the greatest rip-off we face today - may also come down. Excellent.
On balance, the stuff about deflation being bad is probably a load of tosh. Even if it isn't, we are being told this by exactly the same people who got us here in the first place. I don't know how they've got the cheek!
I was also astounded to hear that we might actually end up with deflation in the economy. Apparently this is even worse than inflation. I just don't see it. Petrol prices are deflating at present. I don't see much of a problem in this. Food prices will probably deflate too. Good. Energy prices - the greatest rip-off we face today - may also come down. Excellent.
On balance, the stuff about deflation being bad is probably a load of tosh. Even if it isn't, we are being told this by exactly the same people who got us here in the first place. I don't know how they've got the cheek!
3 comments:
I love it when people whinge about economists – why blame them? Economics is as diverse as any science or any other discipline. Would five chemists, physicists or biologists agree on a new theory? They probably wouldn’t reach a consensus on the type of biscuits to have in a meeting.
Are you blaming the Welfare Economists trying to investigate how the distribution of income could be improved? Or, the Austrian Economists who believe that there should be no government intervention in free markets? Neither of these can be blamed.
This is a case of a market correction becoming a financial crisis because of the ineptitude of people who should know better. Any economist worth their salt could and would have predicted that this wasn’t sustainable.
There are wider issues worldwide, but domestic issues in particular for us. As the most obvious example, clearly house prices weren’t representative of what was actually going on in the wider market. So who is to blame?
The government relaxing banking regulations too much, the regulators not enforcing their powers, and the banks themselves dishing out credit cards and mortgages to anyone with a pulse (and probably some without).
You can also blame speculators. However, not just city traders, but also your average Mr and Mrs Smith who suddenly became ‘property developers’ and bought dozens of buy-to-let abodes when the market was shooting up. Thus, squeezing out genuine buyers who simply wanted a house to buy and live in.
This is symptomatic of the whole economy - short-term speculation as opposed to long-term sense. Everything was based on markets continuing to spiral upwards. Did economists say this would happen? No. People got greedy. Not everyone but some important people. Full stop.
But what is also a load of tosh is the rubbish so-called ‘experts’ spout on television, radio and in the snoozepapers. Comparisons with the Great Depression – ludicrous! They obviously weren’t there.
Finally, deflation will be a benefit to the people who have jobs. But, it will tell us indirectly that lots of people don’t have jobs because the economy is shrinking. Then if hysteresis sets-in it will compound itself and get worse, and possibly lead to the failure of monetary and fiscal policy to control the economy.
Then we will have a full-blown depression.
I feel I should withdraw my post!
That wouldn't be any fun though!
You have to vent your spleen, there's nothing like a good rant. More people should do it instead of bottling it up inside.
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