Thanks for the mention.

About all that deflationary talk. I can’t help but wonder if it’s leading to the big amnesty discussion. Just like Japan the US population is aging and declining. We need a younger and more prolific group to prop up the native population. Low and behold…well, you know where this is going.

Just to be clear, I have NO problem with legal immigration. I don’t even have a problem lifting the immigration limits if limited access to social services. Everyone who wants to be productive and successful is welcome to come here. But they should come with the knowledge that there is no free lunch.

Also, if you can afford it…have babies.

Re: Japan… I saw a theory once that said instead of continuing to waste trillions and trillions of yen on failed gov’t stimulus programs, Japan would be better served using the money to offer couples the equivalent of $100,000 for every new child they can produce. It would not only be a cheaper way to jump start and turn around their sputtering economy, but it would also reverse their population decline, ensuring continued expansion over the long term.

The money supply is actually contracting and banks aren’t lending as much because a)they are actually doing more than checking for a pulse before they lend and b)loan demand is falling due to persistent deleveraging at all levels of the economy. This is deflationary and will be for some time to come.

Thanks for mentioning my article and have a great weekend!

If my prediction is incorrect, then I’m in the wrong camp and deflation is definite possibility. And of course, all of this ignores the fact that, historically, no country has ever been able to rack up the amount of debt we have on the books (especially when one considers all of our unfunded liabilities) and not eventually encounter severe inflation.

Did you check out @BPGlobalPR twitter stream? Anonymous guy who tweets as though he’s the PR department. Some pretty funny stuff.

Take a look at the reasons for Japan’s continuing deflation woes:
1) Fallen asset prices (primarily real estate)
2) Insolvent companies & individuals (many of whom were heavily invested in real estate)
3) Insolvent banks (many of whom had lent to the real estate investors)
4) Fear of insolvent banks (flight to quality investments)
5) Cheap imports-especially raw materials from China
6) Low unemployment rates and low population growth

Except for the unemployment rates, we look a lot like Japan. Bottom line is that we’re over leveraged and are now facing debt deflation.
How do we recover from debt deflation?

Wait for it
.
.
.
inflation.

Second, looking at your debits and credits, I can only presume things are going to get a bit shakier! What’s crazy, is it feels like we’re on a bit of a roller coaster. I’m really hoping for a 2011-2012 boomerang – where the US goes platinum. Of course, this would coincide with me needing to get hired as a teacher, as I would be right at the finishing point in my credential program, and my hope of moving to Ojai (only a wee bit more expensive than where I live now!) So, can we make that happen?!

Re: 2, 3 and 4… Government meddling in Japan is wholly responsible for keeping those insolvent institutions afloat too. I think things would be a lot better – both in Japan and here in the US, for that matter – if capitalism’s great equalizer, creative destruction, was allowed to take its course.

@Little House: You’re welcome! But I don’t think the US will be going platinum anytime soon.

But consider this – when our “workers” demand $75 an hour (whether it is a mechanic or plumber) and a “factory worker” in China is paid a small fraction of that, someone has got to face inflation and someone has got to face deflation.

We have lived in a world where labor cost across countries are simply out of whack. Something has gotta give. There is also a huge supply increase in certain industries (think IT folks from Bangalore!)..So in a sense, perhaps deflation of wages here is inevitable because our labor cost is just too high relative to others?