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| User Info | Pillars of deflationists' arguments disputed; entered at 2007-12-02 14:58:58 | |||
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Sushihorn Posts: 7561 Registered: 2007-10-22 Arlington, TX 
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There is a load of misinformation in those links. Let me focus just on the worst of them:Quote:The “dollar short” scenario of an increasing value of the dollar assumes that the supply of goods remains approximately unaffected by the liquidity crisis. But if both money and goods are contracting, the purchasing power of money can only increase if increase the money supply contracts faster than the supply of goods... This is false on so many levels it's hard to figure out where to begin. I guess for starters, did the "supply of goods" increase or decrease during the Great Depression? Obviously, consumption collapsed, followed by a collape in production - yet prices also fell sharply. It looks as if the amount of virtual money that will be destroyed is at least an order of magnitude greater than all currency in circulation within US borders. Secondly, the supply of goods is not necessarily dictated by production. We have been accumulating crap for decades and essentially ALL of it will become available for sale as liquidation occurs. The producers and distributors of new, similar crap are going to get hammered an many will disappear altogether as eBay becomes the mall. There are MANY years of supply out there just waiting to come to market as their current owners can no longer afford to keep them. Winter is a giant inventory liquidation cycle that can take a very long time. Demand will collapse and supply balloon from existing stock. The providers of new stock (manufacturers) get completely screwed in the deal. 2007-12-02 14:58:58
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