Thursday, October 22, 2009

Calculating Risk Chat

Dryfly: (in reply to Whiskey asking: For whom is this inflationary?)

Doesn't effing matter - inflation is a monetary event NOT a price event. Prices are just symptoms of TWO independent factors: [1] money supply & velocity and [2] actual supply/demand of the good.

Sheesh - you'd think people here would eventually get the memo.

Yagij: Calm down.

Remember that the under 35 crowd have never lived through a time of slow velocity of money supply. Credit boom is all they know, and all they know is a (relatively) stable currency that is the world's reserve paper of choice. They got the memo on supply/demand because they have seen it their entire lives (cool shoes, clothes, toys, BFs/GFs). They have never seen "Deflation" in most of their lives, and if they did, it wasn't the "Candy now costs 5 cents and I don't even have that to spend" kind of deflation. Yes or No?

Dryfly: Yes... plus they've never seen the back side of an innovation wave... we were on the up swing from mid-80s on [IT-telecomm-internet] and we are now well into the 'commoditization & consolidation' down side. Couple that with credit collapse and it is like nothing most of us have ever seen before [not this severe anyway - not since the 30s]. Will probably be 15-20 years before the cycle changes again. That's the typical cycle 40 years or so.

Yagij: Woo! Now if I can get you to talk to the 45-55 yo crowd who talk about how bad the 70s were and how it isn't as bad this time and we may start making progress in the "relearning" of America!

Dryfly: The 70s & 80s were worse - LOCALLY - in rust belt. Wasn't too bad in the SE US or West Coast. In that respect today is much harder than the 70s & 80s... its national if not international.

Comrade Kristina: I hear people in their 40's and 50's talking about deflation like it is a good thing. All they know is inflation is bad so the opposite must be good. I try to explain the opposite is much, much worse but they don't seem to get it. They will though, they will.

Dryfly: I see the exact opposite - young people saying deflation is good because they hope to buy houses cheap. They don't realize in a true deflation most people’s wages drop even faster making the cheap house 'expensive'. Few benefit from either deflation or inflation once all factors are evenly weighed. Even fewer realize this.