I’ve recently quit my job at Hewlett Packard for a smaller company. My experience was far different.

In good times they were swinging the ax every which way taking out good and bad folks. I fear what will happen when they actually lose money.

The big problem is the MSM and the TOTAL lack of financial acumen among the pubic and policy makers. I actually enjoy it when Joe Kernen and The Brain make fun of Congressional questions, these people make fools of themselves. But the joke is on us because they are in control.

Don’t misunderstand me, I do not wait with baited breath to hear the latest Bartiromo report. Gee, a sell off is profit taking, and a jump is a “technical rally/short squeeze”, yeah, we got it the first hundred times But some of them actually have been around a long time and they are certainly smarter than the MSM.

Of course over-deflation is bad, just as over-inflation is bad. Wild price variations are inconvenient and discourage business plans. But I see no real evidence of this situation; it strikes me as an improvement over the radical fall of the dollar in recent history.

Deflation is bad for borrowers. But that also means that investors must offer better terms to those with good investment ideas. (Lenders need not hesitate because of deflation. Every dollar lent and returned gives both interest and deflationary gains.) Since the idea-creators are more rare in America, and more in need of reward, this is a net positive for the economy.

(You can see the problems of too much ill-invested capital in our stock market. Are the current wild fluctuations symptomatic of people who’ve thoughtfully chosen business ventures over the long term? No, they show we’re a nation of speculators, because we can’t figure out anything better to do with the cash. Without a solid reference, any ripple that jeopardizes short-term gain might become a tsunami.)

Yes, it is harder to magically create wealth with financial derivatives. But I would hope the housing bubble crash would teach us that such wealth can magically disappear just as easily. The high prices such inflation creates aren’t particularly helpful either. Look at the ridiculous price of houses over the last five years.

So if we get serious deflation, I will be able to buy books cheaper. Hard for me to be scared of that part of it at least. Heating my house with burning peat or coal doesn’t appeal so much, though.

It is extremely important that the tiniest decrease in compensation causes an incommenserately large decrease in discretionary spending.

I think that the itsy bit of price deflation is disregarded as people see their earnings narrow (not to mention asset deflation, threats of job loss, etc.).

Can someone comment on whether over-consumption and easy credit caused this? We have been hearing for years if not decades about negative savings and credit card debt. Is the panic the medicine that we must go through because people simply refuse to live within their means?

This something for nothing (handouts) or for no money down, pay later, got us here IMHO.

I drive an 18 year old car, my house is paid for and I have 0 debt. That’s right you heard me, zero. All of my investments are in large domestic corporatations because I never could understand debt equities and I have done a lot of studying, believe me.

It’s not that I think usury is evil so much as that I want to always be in command of my destiny. And here I am living in the word’s largest debtor nation. Roost, meet chickens?

Thank you Blackhead and the rest of y’all. Politics are one thing, but economics are very personal, indeed.

Is not the current situation sufficiently unique with all sorts of odd stressors on the economy to render any generalized assessment moot?

There are a lot of strong and unusual impulses manifesting themselves in this economy. Moreover, the economy has never been as globalized as it is now.

At some point, we need to admit we are guessing.

For a description of what deflation means to our economy I recommend the recent book:

“The Forgotten Man: A New History of the Great Depression” by Amity Schlaes (2007)

Following the Stock Market crash of 1929, Hoover and then Roosevelt turned a recession into a decade-long Depression by attacking what they thought were the problems, inflation and unemployment (which are quickly reflected at the voting booth). As it turned out, tightening money and trying to keep wages and employment up were exactly the wrong thing to do because deflation — the shortage of money in the economy — caused the economy to shrink dramatically. Hoover raised taxes and instituted punishing tariffs, while FDR tinkered with the gold standard and experimented wildly with socialism and government spending.( The Nobama administration appears poised to bring us the worst of both Hoover and FDR!)

What this meant for the average American 1n the 1930s– the “Forgotten Man” — is that the horizons closed in on investing, exanding, creating new business, and new building — for many communities the simple absence of money — not capital, but actual money, meant that the simplest transactions were impossible. Communities issued their own scrip and people resorted to barter.

But our country and its economy is dfferent now! you are thinking. yes, it is. We would face different scarcities. Schlaes points out that the most expensive items for Americans in the 1920s before the Depression were food and clothing. And indeed during the Depression (attested to by some of the great novels, films, photos and songs of the period) hunger and lack of clothing were acute and constant.

(This reminds me of our recent Presidential election, in which John Edwards, trying to depict poverty in his “Two Americas” campaign, always invoked the image of a little girl who had no winter coat. This caused puzzlement and derision, since clothing, as well as food, is now cheap and plentiful. Edwards obviously cast back to family stories about the Depession, in which clothes and shoes did indeed wear out and could not be easily replaced. Today, a child’s coat at Walmart or Target is cheaper than a movie ticket — the opposite of the days of the Depression, where movies cost 10 or 15 cents but a coat would cost ten times that amount).

What are our big costs today? Health and child care, higher education, transportation….so our Obama Depression will feature fat poor untrained people living near where they work at low-wage jobs (if they have jobs at all. People will be much less healthy than they are now because of the cheap food and little health care, so they will reverse mortality rates and die sooner in their lives…and that’s the upside.

But the same is true of their followers.

You can’t discount the ignorance of most people about the economy, what makes it tick, and even their own money. Nor can you discount their propensity to swallow what the MSM tells them hook, line, sinker, and fishing boat.

So when the 24/7 news channels are hammering for months on end about how bad things are, many people believe it. They stop spending. They get scared. (Besides, isn’t it a stock market truism that the individual investor is always wrong?)

I don’t overestimate the American consumers’ ability to maintain that discipline for very long, but I do believe that seeing the declines in real estate values, in particular, has put a fear into them that just may have lasting effects.

We shall see.

At the time TARP was being discussed, many of us were skeptical. In particular, I was puzzled by the unwillingless of Paulson and others to at least address alternatives and explain why they were insufficient.

As it turns out, the core of TARP will never be implemented, so all of the people saying that TARP was needed or we faced certain doom should be hiding in their basements by now.

I’m not saying TARP was a scam.

I’m saying it was ill conceived in terms of both policy and politics.

But yes, please consider my remarks suitably modified.

the FEd and the US gov have inflated the money supply by about $5 trillion. That still leaves $51 Trillion in deflationary pressure in the world today. With China and the EU that might drop to $48-$49 Trillion.

This is why you are seeing deflation. We must deflate about $48 Trillion or raise $48 Trillion in capital to compensate.

The gov can not do it. There are only two solutions to the problem. Allow the deflation to happen. It will be painful but it will be for the best in the end. Or inlfate the money supply. this will cause massive HYPERINFLATION. this was the approach Zimbabwe took. I don’t know about you but I would rather not have to pay $1 billion for a loaf of bread.

The best thing to happen is deflation. My advice is get out of debt. If you have no debt deflation is your best friend. Your cash is worth more. Yuo can buy more assets with less cash. Deflation can be great for debtless societies.

I would imagine that the gov thinking they can “fix” this will simple inflate the money supply. This will cause massive inflation.

I don’t know a single person (in real life) who was happy with that “crap sandwich.” Please, please, please don’t try to turn this into a “Democratic bailout.” We didn’t think it up. Yes, more of my side voted for it, but as best I can tell they did so because they were told a failure to do so would be a disaster.

Yes, I’d prefer my party’s elected officials show more spine, but I don’t think this was something they did for the heck of it.

I’m perfectly willing to believe the whole thing was a scam of some sort. I have nothing personally invested (politically speaking) in TARP having been a good idea or honestly presented. Seeing so many of the great houses fall scares people. It’s natural to want someone to respond, to try to fix it. My problem with TARP (prior to passage) was I had no idea as to whether or not it was the right response, both in scope or direction.

Whatever it turns out to be, I’m pretty sure we all got screwed.