Everything’s Too Expensive…and why deflation is good for regular Joe’s but bad for investors

The Fed’s de facto policy is to stave off deflation at absolutely any cost. The fear related to deflation is it will lead to general economic chaos. The fear of bogeyman writ large.

One of the underlying assumptions with “stimulating” inflation, assuming of course stimulating inflation were truly possible in today’s circumstances, is that wages would correspondingly go up. I just don’t think this is true. For decades, the average Joe has not seen wages keep up with inflation. To assume it is axiomatic that wages will inflate as a byproduct of all this stimulating is off base, just like it is off base to assume that printing money necessarily will cause inflation. Possibly predictable, but far from certain. I hate economists (or, more appropriately, English major journalists trying to report about economic theory) who interchange predictable outcomes for certain outcomes.

An example of what is certain is, if prices go down, the average Joe will be able to buy more for less with the money already in his pocket. This is a certain outcome.

What is a theoretically predictable outcome is, if the Fed Fairy doesn’t print more money, the financial markets will crater again, and jobs will decline further and the average Joe won’t be able to consume expensive goods. And then we will all be part of a Grapes of Wrath story-line. This (purportedly) is a “predictable” outcome the Fed MUST AVOID AT ALL COSTS. (poop.)

The linked article here is a great example of why I do not believe in monetary manipulation, particularly today’s story-line. In India, Gillette is in full gear marketing 15 cent razors. In the US, Gillette spends millions upon millions on advertising so Americans will buy $2-3 dollar razors.

America is already a massively inflated economy compared to most of the world, yet we, at the same time, want to artificially keep it inflated, but present ourselves as a free market player in the global economy. It is a farce.

Gillette in India

So, as I mentioned before, the Fed Fairy theory, based on a stack of “predictable outcomes”, necessitates avoiding deflation by printing money. Let’s say the Fed is successful pursuing this theory. In fact let’s say everything it hopes to achieve is successful, EXCEPT wage inflation. What is the outcome? $4 razors and less money in the pocket of the average Joe.

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