Deflation arrives in the EU.

[sublime5447]

It will be interesting to see what the ECB is going to do about this. http://www.theautomaticearth.com/Finance/deflation-arrives-in-the-eurozone.html
Is this the beginning of the end? I wonder if by the end of 2013 if the lines in the second graph will cross as the ECB ramps up bond buying programs? There are only a hand full of people who know just how dangerous deflation will be.... The New great depression will be the worst ever.

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[Puppet]

If deflation is so bad, then how horrible would a bitcoin based economy be?

[sublime5447]

Spoken like someone who has no idea how the global economy is structured. Deflation is fine if money was real and not debt based. Deflation destroys money and causes a negative feedback loop that feeds on itself causing the collapses of the worlds major economies.  

[sublime5447]

http://en.wikipedia.org/wiki/Causes_of_the_Great_Depression

Milton freedom and Ann Schwartz correctly identified the causes of the great depression. It was a contraction of the money supply (deflation) or debt supply how ever you want to look at it.

[cbeast]

http://en.wikipedia.org/wiki/Causes_of_the_Great_Depression

Milton freedom and Ann Schwartz correctly identified the causes of the great depression. It was a contraction of the money supply (deflation) or debt supply how ever you want to look at it.

Considering that they are printing money faster than any time in history, how would we be experiencing deflation?

[marcus_of_augustus]

If deflation is so bad, then how horrible would a bitcoin based economy be?

Not bad at all, because you can vote with your wallet and get out of it if you choose.

With state fiat monopoly deflation there is no escape and they exacerbate it by criminalising gold and alternate currencies in such situations. In order to support the failing system they lock everybody in to "share equally" in the misery of the elites who are losing their wealth and status.

[sublime5447]

http://en.wikipedia.org/wiki/Causes_of_the_Great_Depression

Milton freedom and Ann Schwartz correctly identified the causes of the great depression. It was a contraction of the money supply (deflation) or debt supply how ever you want to look at it.

Considering that they are printing money faster than any time in history, how would we be experiencing deflation?

This is a great question. The reason that we will experience deflation is that no matter how much money they print if the can't get governments or individuals to take out loans the credit supply will deflate. All of the printed money stays in bank vaults as excess reserves. This is what is happening in america right now too. The world is a wash in debt, we are the greatest debtor nation the world has ever seen. So despite historically low interest rates for a historically long period of time the economy has not recovered and will not recover until the there is a debt liquidation. The only way for economies to grow is to add debt, the total debt must always grow, but it looks like we have reached the limits of credit expansion. This is the reason that the FED has engaged in QE. If they let the debt contract we will fall into a new great depression. The only way to cut the trillion dollar deficits is for the private sector to increase its debt. Our economy is on government life support, If they stop spending it will collapse      

[sublime5447]

If deflation is so bad, then how horrible would a bitcoin based economy be?

Not bad at all, because you can vote with your wallet and get out of it if you choose.

With state fiat monopoly deflation there is no escape and they exacerbate it by criminalising gold and alternate currencies in such situations. In order to support the failing system they lock everybody in to "share equally" in the misery of the elites who are losing their wealth and status.

That is exactly what I have done. I just wish I had a bigger wallet.

[JustJake]

It is hard to know what people mean by "print money".  If you mean physically printing money then there is no physical way our current system could print money or destroy money fast enough to keep up with the changes in volume of money supply created by debt.  The money supply in the United States based solely on debt is just that much larger than the sum total of physical bills and coins.  This is caused by the notion that individual A takes out a loan for $10,000.  That is money created by debt.  They use that money to pay a contractor to work on their house.  That money goes to a bank B.  Bank B may now use that money (that was originally debt) and can loan $90,000 to someone else based on this new money so they create debt based on someone's debt.  The actual supply of printed money is a tiny fraction of the money supply created by debt.

If by print money you just mean borrow from the fed and pay out in "stimulus" then that is a different story.  Maybe the stimulus needs to be a loan with negative interest.  That would keep inflation going.

[sublime5447]

I dont know who you are directing this comment to, If me. Ya when I say print money that is just to keep things simple. They dont print they just add digits on balance sheets. The important aspect is money isn't "printed" into existence it is borrowed into existence

[CurbsideProphet]

http://en.wikipedia.org/wiki/Causes_of_the_Great_Depression

Milton freedom and Ann Schwartz correctly identified the causes of the great depression. It was a contraction of the money supply (deflation) or debt supply how ever you want to look at it.

Considering that they are printing money faster than any time in history, how would we be experiencing deflation?

Because an increase in money supply does not equal inflation.  You need to factor in the velocity of money, amongst other things.

[hashman]

http://en.wikipedia.org/wiki/Causes_of_the_Great_Depression

Milton freedom and Ann Schwartz correctly identified the causes of the great depression. It was a contraction of the money supply (deflation) or debt supply how ever you want to look at it.

Considering that they are printing money faster than any time in history, how would we be experiencing [price] deflation?

[edit]

Two possibilities, which may or may not be happening:

1) The money being printed is only going into a few bank accounts and is not trickling down into the economy.  A guy with 12 figures in the bank suddenly gets 15 figures, it's not going to change his spending habits much. 

2) Debts are being defaulted on also very quickly, meaning that there is actually not as much monetary inflation as you think. 

[xxjs]

Another upward pressure for the value of the dollar is people loosing confidence in other currencies.

These have been mentioned in the press lately: Japanese yen, Korean won, Taiwan dollar and the Australian dollar.

[conspirosphere.tk]

I would not speak of "deflation" unless I see lower costs of life (which are nowhere to be seen).

Anyway after the "problem" (great depression 2.0), get ready for their "solutions" (starting with more funny money directly from the governments, so that they will be able to keep the peasants under control):

- Shock: Powerful British Money Man Calls for Central Bank Currency to Be Handed Out to 'the People' -From The Daily Bell, FEBRUARY 13, 2013
http://webabuser.blogspot.com/2013/02/shock-powerful-british-money-man-calls.html

- Financial Drone Attack! From Bill Bonner's Diary, Thursday, 14 February 2013
http://webabuser.blogspot.com/2013/02/financial-drone-attack.html

[Puppet]

Spoken like someone who has no idea how the global economy is structured. Deflation is fine if money was real and not debt based.

It doesnt matter if money is debt based or not. If I sell a car for dollar or bitcoins, in both cases the money serves as a delayed trade, allowing me to trade the value of the car for something else later. As such you could say bitcoins represent debt just as well. The real difference is that fiat money can be created based on debt, bitcoins can not.  And whats happening now? Not enough credit (ie money) is being created and thats a serious problem for the economy. How exactly do you think bitcoin would solve this?

[marcus_of_augustus]

Spoken like someone who has no idea how the global economy is structured. Deflation is fine if money was real and not debt based.

It doesnt matter if money is debt based or not. If I sell a car for dollar or bitcoins, in both cases the money serves as a delayed trade, allowing me to trade the value of the car for something else later. As such you could say bitcoins represent debt just as well. The real difference is that fiat money can be created based on debt, bitcoins can not.  And whats happening now? Not enough credit (ie money) is being created and thats a serious problem for the economy. How exactly do you think bitcoin would solve this?

Bitcoins are being created at the rate of 3600 per day and they appear to be fulfilling a particular niche demand for money rather well, is that not a solution?

Alternate crypto-currencies are also being created if there are further demands for money also.

The economies of the world have many other serious problems, in addition to lack of credit issuance.

[Puppet]

Bitcoins are being created at the rate of 3600 per day and they appear to be fulfilling a particular niche demand for money rather well, is that not a solution?

Sure its a solution. A pretty nifty one too for a lot of things, but a magical fix for our economy, or even a viable replacement to fiat currency, it aint. Economies need credit, and a deflationary currency just doesnt allow that. The current block production rate will slow and eventually grind to a halt. How do you expect to be able to pay back a loan plus interest when its denominated in something that grows in value faster than the economy? Who is going to lend you bitcoins over 20 years to buy a house or build a factory ? Do you think the economy will boom when everyone just sits on their asses and their bitcoins?

There is a reason we invented paper money on top of gold in the middle ages; economies needed credit then, we need it now. Having money thats created and destroyed based on debt is actually a good idea. Imagining we could replace it with bitcoins or gold  is like reinventing the automobile by spanning a carriage behind a horse.

[xxjs]

Diminishing prices due to a debt crisis I can understand. Sure it will be met with new debt.

Why the debt? Seems to me the economy would me much more stable if the money, if they think it is needed, were outright printed, and the bank reserve requirement high and the money multiplier low.

The new money outright printed could be used to fund the government deficit and given to cronies just like now. Is it a strategy to conceal the printing?

[sublime5447]

Spoken like someone who has no idea how the global economy is structured. Deflation is fine if money was real and not debt based.

It doesnt matter if money is debt based or not. If I sell a car for dollar or bitcoins, in both cases the money serves as a delayed trade, allowing me to trade the value of the car for something else later. As such you could say bitcoins represent debt just as well. The real difference is that fiat money can be created based on debt, bitcoins can not.  And whats happening now? Not enough credit (ie money) is being created and thats a serious problem for the economy. How exactly do you think bitcoin would solve this?

All money is and always has been an IOU. When you buy a car with bitcoin you are not leveraged you actually have the bitcoin. When you take out a car loan you are paying with something you dont have and that doesn't exist until you borrow it into existence. You cant borrow bitcoins into existence. So yes all money is a debt (I prefer a promise) but our fiat system is debt based on a promise. That in and of it's self is not a problem. The problem arises when a loan is taken out the money springs into existence out of thin air, but only the principle is created. The interest due on the principle is never created. This creates a system where total debt must always rise, but there are limits to the expansion of debt. I believe we have reached that limit. So yes it does matter if it is debt based or not.   

[marcus_of_augustus]

There is a reason we invented paper money on top of gold in the middle ages; economies needed credit then, we need it now. Having money thats created and destroyed based on debt is actually a good idea.

Yet you are surrounded by ample evidence in the current era to the contrary. The debt-based monetary system has led to the obviously unsustainable position that all economic output, global GDP is now being consumed up by interest payments on outstanding debt, it is baked in to the mathematics of compounding interest. Probably not worth following this discussion much further if you are going to deny facts.

Paper debt money and other promises-of-payment money really, truly are competitive ... as long as it operates as a monopoly is what you are really saying isn't it? E.g digital money backed by gold (crypto-gold) or commodity baskets and etc hasn't even been allowed to compete, yet. Raising obfuscations like horses and carriage technological analogies is conveniently ignoring legal tender laws and other market-distorting regulations that outlawed competing monetary technologies and innovations since the late 1800's.

Bitcoin is far in advance of any monetary product on the market today technologically, as a requirement for it to operate in such a highly anti-competitive environment, and that is why it is kicking asses, taking names and enabling digital black markets. The stupid, lazy, greedy people involved in monetary technologies, central bankers and their foot soldiers in mega banks, financial institutions and economic academia, could never come up with something as sophisticated as bitcoin in a 1000 years, yet cryptographers hacked it together in a couple of years as a side project.

Diss it as much as you like from haughty economic academic standpoints. Fact is we made it work and it is a reality, all you seem to have are theories of why it shouldn't work.