Comments | the_recession: Lawrence Lindsey: U.S. In Debt Deflation Trap, More QE To Come

cieldumort in the_recession

Lawrence Lindsey: U.S. In Debt Deflation Trap, More QE To Come

Jul 22, 2010 13:00

From Reuters:
Lindsey: U.S. entering deflation trap, to ease more

(Reuters) - Former Federal Reserve board member Lawrence Lindsey said on Thursday it will be "obvious" by the end of this year that the U.S. economy has entered a "deflationary trap."

"We know from (Fed) Chairman (Ben) Bernanke's recent comments that it is now at least a concern ... By ( Read more... )

zombies, demand destruction, quantitative easing, depression circa 2009, depressions, debt, deflation, lawrence lindsey

Comments 7

floundah July 22 2010, 18:22:23 UTC

Seems like everything is going up except Joe Average's wages. My rent went up. My food bills and insurance went up. Everything else went up. My boss got a raise even though he broke the law (Cieldumort, you know about this situation from reading my LJ). I did my job well and not only got no raise for over two years, I now have to reapply for it. My job, along with other people's is up for the public to apply for.

Am I angry? Nah. That's deflation for you. Crap wages and job loss.

cieldumort July 22 2010, 22:26:08 UTC

That sounds like a really local event (the inflation you write of). Nationally speaking at least, outright deflation is pretty much settling in.

Google search for deflation just today, see what comes up. Here are a few examples:

http://www.reuters.com/article/idUSTRE66L3YG20100722

http://money.usnews.com/money/blogs/flowchart/2010/07/22/how-to-prepare-for-deflation.html

http://www.cbc.ca/money/story/2010/07/22/loblaw-earnings-fall.html

floundah July 23 2010, 01:48:28 UTC

"As prices fall, companies earn less money, so they cut costs to remain profitable. That typically leads to layoffs and pay cuts. Consumers who earn less spend less, and that forces down prices even more. Borrowing dries up, since debt gets more expensive over time when incomes are falling. The resulting credit crunch, combined with depressed spending, can lock the economy into a period of decline that's hard to escape from." -- money.USNEWS.com

That makes sense, and I agree that it's a bad scenario. Deflation like that may be true for the rest of the country but not for the Boston/NYC area. We're getting squeezed by rising costs, combined with layoffs and falling wages. It's not a really local event, but it might be a regional one.

cieldumort July 23 2010, 03:20:56 UTC

Borrowing dries up, since debt gets more expensive over time when incomes are falling. The resulting credit crunch, combined with depressed spending, can lock the economy into a period of decline that's hard to escape from.

Here's what this looks like in graphic form:

( ... )

Thread 7