i think we must face it ..........., page-53

BH!,

I forgot to reply to this statement you made:

"As I see it, there is a distinction between a debt deflation and a general "goods" deflation. In the first case, you look at asset prices and the debts which have supported the build up in prices. At present, they are deflating. The government, however, is doing everything it possibly can to stop that from happening, by creating new public debt to prop that up. They're not doing it fast enough, so we still have debt and asset deflation.

On the flip side, we have the real, productive economy. Last I looked, while my petrol is a bit cheaper, it's not massively so. My beer is more expensive, as is my bread, milk, the wages I pay my employees, my utilities, phone, Foxtel...you get the picture. There ain't no deflation in the "real" world, outside of the banking and investment sectors."

It would appear that Americans are now experiencing deflation (or close to it) in their real economy. The CPI is now zero and going negative. Employees are working fewer hours per week meaning less wages to pay for an employer like yourself, etc etc. So I'm not so sure about their being a clear distinction between debt deflation and general goods deflation. At least not until there is a shortage of essential items, which SaturnV discusses today in reference to Rick Ackerman's latest.

FWIW, I think Australians have yet to experience deflation for three reasons: 1) the 35% plunge in our currency relative to USD; 2) unemployment has yet to take off; 3) no negative wealth effect yet. Sure, stocks prices have halved but most people have shares tied up in Super and most won't retire for at least another 5-10 yrs. Also, house prices have declined slighty (10-20%) but this is no big deal given "values" have tripled in the past decade.

Rowingboat.