Economic Outlook: Pending Deflation Prognostication

Depending on which of these two distinguished fellows is correct, both of whom accurately predicted the Great Recession, the second half of 2010 may begin to usher in better economic times, or some really, really bad times...

from the New York Times
[click here for full NYT article]

2 Top Economists Differ Sharply on Risk of Deflation

By NELSON D. SCHWARTZ

Published: August 5, 2010

Jan Hatzius of Goldman Sachs and Richard Berner of Morgan Stanley both predicted the recent downturn, but they travel separate roads on deflation. ...

The split between the chief economists, whose work helps inform trading strategies recommended to investors by their firms, echoes a broader and sometimes fiercer debate among academic economists and commentators about the threat posed by deflation and what the government’s response should be.

According to the deflationistas, as they are nicknamed, a new round of stimulus spending by Washington is urgently required to stave off a Depression-like cycle of falling prices and wages that is difficult to reverse once it is set in motion.

Inflationistas, by contrast, worry more about the effect that additional government borrowing could have on the recovery. With the budget deficit expected to hover around $1 trillion a year for the next decade, they say, interest rates could eventually surge, making borrowing — and goods — more expensive. A double dip, they say, is highly unlikely.

RHLJ: Consumer savings, crazily enough, is one of the big causes of the slow growth. Americans are saving a lot more than they have in a long time--but that also means that they are spending less. And the U.S. economy is heavily dependent on consumer spending. There's the rub.

To read the full article, highly recommended by the RHLJ staff, go to the New York Times permalink:

http://www.nytimes.com/2010/08/06/business/economy/06deflation.html

The Editor in Chief

Imagine: most of my life I weighed 135 lbs.!

















Sooner or later I'll post a few more personal pics.

For now, I'm just using this as a sort of placeholder, to see how they look on the web, as well as checking out how this function of the Picasa 3 photo-editing application works.

Once again, Nobel-Prize winning economist Thomas L. Freidman has hit the nail on the head...

Opinion

This Time Is Different

By THOMAS L. FRIEDMAN

Published: June 11, 2010

This is a window of opportunity to insulate ourselves against the bad things we cannot control and get serious about fixing the problems that we can.

We urge everyone--it doesn't matter which party you belong to, this is ideology-free--to follow the link below and read the full Times article. (If I get some response from folks about this, I can go back and pull the complete article.)

The point is that in the last ten years Americans have dodged a lot of bullets--more like artillery shells--from 9/11 and $4-per-gallon-gas to the Great Recession and the Gulf Oil Spill. Now Providence has given us a moment to breathe, a golden opportunity to look past ideological differences and deploy real, lobbyist-free solutions. Some solutions only the government can implement, but frankly, we must do much more ourselves.

There seem to be a lot of people who hold the position that "government isn't the solution." But way too many of these same folks aren't offering or doing anything themselves to solve these problems either. You can't have it both ways. To be an American means more than just having the right to be left alone. Our world today has too many problems that need to be solved. When we all sit back and wait for someone else to come up with the ideas, do the work and pay the bills, nothing gets done, nothing is solved or improved, and chronic problems fester into national crises. The founding fathers knew well that only a responsible, active and informed citizenry can sustain a viable democracy.

This Time Is Different: Full Article <--click here