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View Diary: Paul Krugman: Obama's proposed stimulus $1T too small (129 comments)

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  •  WHere do you see deflation? (1+ / 0-)
    Recommended by:
    Bronx59

    It ain't at the grocery store.

    Gold and silver are doing just fine.  And the cost of living ain't coming down either.  

    •  Give it time. (3+ / 0-)
      Recommended by:
      gmb, mickslam, oscarsmom

      We have a real risk of a deflationary spiral. That happened in the Great Depression.

      "What we've seen the last few days is nothing less than the final verdict on an economic philosophy that has completely failed." -- Barack Obama

      by TomP on Tue Jan 06, 2009 at 03:12:24 PM PST

      [ Parent ]

      •  This terrifies me (3+ / 0-)
        Recommended by:
        gmb, oscarsmom, TomP

        We are already facing huge deflation in the largest asset 90% of americans will ever purchase - their house.  As long as housing is losing value, we are at risk of deflation.  

        Take a look at Japan, and their real estate market.  We are in very serious trouble, and that is one of the reasons I am recommending spending so much money right now on stimulus.

        I am repeating myself, and thats ok.

        by mickslam on Tue Jan 06, 2009 at 03:14:39 PM PST

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        •  A reduction in interest rates (0+ / 0-)

          if it can be done, would stimulate the real estate market, I'm sure of it.  There are plenty of people out there that would love to buy, at 4% or less, and even more that could refinance and buy a car or something similar, or just keep themselves afloat a little longer, if that happened.

          Save the parrots: Drink shade-grown coffee!

          by oscarsmom on Tue Jan 06, 2009 at 03:19:53 PM PST

          [ Parent ]

          •  Brad delong (0+ / 0-)

            is talking about having the govt give loans directly.  This might push the rates down.  However, this is quite scary to me.  Because if housing prices stay this high, many people (me included) will never be able to afford a house, regardless of the interest rates.  

            I am repeating myself, and thats ok.

            by mickslam on Tue Jan 06, 2009 at 03:24:48 PM PST

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            •  There's no magic bullet... (0+ / 0-)

              we want to head off a deflationary collapse in housing prices, but at the same time not kick off another housing bubble, which is how we got into this mess.

              Not many easy choices here...

              "President Obama will be the most liberal President of our lifetime."

              by rashomon on Tue Jan 06, 2009 at 03:35:03 PM PST

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              •  I do think the bubble to a large extent (0+ / 0-)

                has burst.  The bad mortgages available for the last 5 yrs have not been out there now for a year and a half, and prices have adjusted accordingly,  FWIW.

                Save the parrots: Drink shade-grown coffee!

                by oscarsmom on Tue Jan 06, 2009 at 03:36:21 PM PST

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              •  I hate no good solutions, but we (0+ / 0-)

                seem to have no good solutions for the real estate market.  letting prices slide makes the U.S. public much, much poorer, keeping prices high locks out significant percentages of the population from owning a home and reduces family mobility.

                I don't have a good solution, other than gigantic wages increases for the U.S. public.  And I am not holding my breath on those increases.  

                I am repeating myself, and thats ok.

                by mickslam on Tue Jan 06, 2009 at 03:39:22 PM PST

                [ Parent ]

            •  Well the market will always affect (0+ / 0-)

              prices.  No matter what your individual situation is, it's a fact that enough people can currently afford to buy a house at the current prices to keep them that high.  That might change but it will be because incomes are down and/or unemployment is up.  You shouldn't count on the market to sink to your level; it's much more likely to affect your job as well.

              To buy a house you've either got to start small with a property you might not find ideal, move to a place with lower prices, or earn more!

              I'd love for Maui condos to sink to my level, but it's highly unlikely to happen, as there are tons of other people out there who still want one.

              Save the parrots: Drink shade-grown coffee!

              by oscarsmom on Tue Jan 06, 2009 at 03:35:13 PM PST

              [ Parent ]

    •  Deflation will happen if (1+ / 0-)
      Recommended by:
      TomP

      it becomes a better investment to keep your money in your bank (or mattress) than in a constantly failing investment like a house or stock.  Does that sound so unlikely?

      Save the parrots: Drink shade-grown coffee!

      by oscarsmom on Tue Jan 06, 2009 at 03:18:22 PM PST

      [ Parent ]

      •  It is already happening (1+ / 0-)
        Recommended by:
        oscarsmom

        3 month T-bills were negative for a few weeks.  In other words, people just wanted their money back and didn't care if they lost a little, because all other investments were so risky they were not worth investing in.

        Yikes.

        I am repeating myself, and thats ok.

        by mickslam on Tue Jan 06, 2009 at 03:26:08 PM PST

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        •  What I want to know is, (0+ / 0-)

          don't the deflationary and inflationary pressures cancel each other out somewhat?  It seems like they would have to but I'm no expert.

          Save the parrots: Drink shade-grown coffee!

          by oscarsmom on Tue Jan 06, 2009 at 03:32:03 PM PST

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          •  I just don't buy the possibility of deflation (0+ / 0-)

            ...when money can be created in limitless quantities with a few clicks of a mouse or a couple of e-mails at the Federal Reserve.

            Bernanke seems entirely willing to do exactly that.

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