Gold Drops: Deflation Fears Being Stoked?
Gold's latest drop of almost 2% this past Monday stokes fears of deflation. As we watch Europe's economies dip into recession, Japan's struggles to escape deflation flagging, it appears U.S. GDP and other economic indicators remain the only regional resistance to what appears to be a worldwide trend.
Should we regular mortals fear deflation? On the one hand, prices should fall in any extended deflation. Isn't that good for most of us? Don't we want to see the cost of food and fuel fall? Of course we do. Wouldn't we like to see the prices of real estate fall to more affordable levels so that those of us who've been looking for bargains might find a good house or apartment to buy? Yes again.
But haven't we been hearing about the threat of deflation for a while now? And have any of you seen food and fuel prices fall in any significant manner? Maybe one or two here or there. But have noticed any general trend down in these basics? I don't think so.
What about real estate? While prices vary in different parts of the country, the Northeast has seen prices rise since 2008 back to the unaffordable levels that caused people to take on more debt than they can really afford. The difference between the boom that led to the bust in 2006-2007 and today is simply that many folks aren't as willing to choke themselves on mortgage debt to get into that "dream house" anymore. And so sales - despite the occasional upbeat headlines designed to pump the housing market - have continued to disappoint.
So while we watch economic reports point to deflation, we mere mortals haven't really seen prices decrease much on the items we need to purchase every day. Of course if central banks succeed in pumping up money supply to address their dread of deflation, we may eventually face the inflation that we keep hearing will take off one of these days. For now, though, "one of these days" remains "some day" as in still way out there.
Frankly, none of this really sounds very appealing, does it? Deflation, if it's real, doesn't really benefit us. And inflation, if it occurs, will really whack us. But if it's any consolation, the tech industry in Silicone Valley and Manhattan seems to be doing quite well. Feeling any better?
Should we regular mortals fear deflation? On the one hand, prices should fall in any extended deflation. Isn't that good for most of us? Don't we want to see the cost of food and fuel fall? Of course we do. Wouldn't we like to see the prices of real estate fall to more affordable levels so that those of us who've been looking for bargains might find a good house or apartment to buy? Yes again.
But haven't we been hearing about the threat of deflation for a while now? And have any of you seen food and fuel prices fall in any significant manner? Maybe one or two here or there. But have noticed any general trend down in these basics? I don't think so.
What about real estate? While prices vary in different parts of the country, the Northeast has seen prices rise since 2008 back to the unaffordable levels that caused people to take on more debt than they can really afford. The difference between the boom that led to the bust in 2006-2007 and today is simply that many folks aren't as willing to choke themselves on mortgage debt to get into that "dream house" anymore. And so sales - despite the occasional upbeat headlines designed to pump the housing market - have continued to disappoint.
So while we watch economic reports point to deflation, we mere mortals haven't really seen prices decrease much on the items we need to purchase every day. Of course if central banks succeed in pumping up money supply to address their dread of deflation, we may eventually face the inflation that we keep hearing will take off one of these days. For now, though, "one of these days" remains "some day" as in still way out there.
Frankly, none of this really sounds very appealing, does it? Deflation, if it's real, doesn't really benefit us. And inflation, if it occurs, will really whack us. But if it's any consolation, the tech industry in Silicone Valley and Manhattan seems to be doing quite well. Feeling any better?
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