Things I (Do) Worry About: Deflation || Peter Zeihan
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- เผยแพร่เมื่อ 17 ก.ย. 2024
- We're all quite familiar with the concept of inflation, but inflation's dark and twisted sister deflation doesn't come out of his shell all that often. So, for our next episode of 'Things I Worry About' we're talking about deflation.
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#deflation #inflation #economy
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Is this a good time to buy stocks? I know everyone is saying stocks are at a discount and all, but just how long will It take to recover, or am I better off putting my money elsewhere. I need a lot as rent, inflation alone eat up almost all of what I make, with dependents and other obligations included. Tbh it's an uncertain year for me.
If you are not too savvy with the market, it’s the best time! just buy and hold on strong companies or best you seek out areas within sectors that can help you sustain a balance in both growth and value overtime. In certain cases, it's even wiser to speak with a smartvestor to determine options best meant for you, I personally did this, and it works pretty well..
Well john, my question is which stocks sectors should I consider adding to my individual fidelity, I intend to hold on for a decade or more.
right now I’m being focused on renewable energy, semiconductors, Ai chips which will be hugely integral on every sectors in the coming years. an absolute power move right now.
Add Gold and silver as well.
I genuinely think we are going all chips soon, these are shrewd sectors seems like a lot of your interest is riding on this, I could really use your viewpoint, get me involved.
The problem with deflation isn't that it wipes out consumption - that's a symptom, not a cause. Irving Fisher nailed this down perfectly: deflation is a falling of prices, and a wage is a price for labor. Wages fall, but debt does not deflate; you still owe the same mortgage and car payment and credit card payments, etc., each month. But now you have a smaller income to pay it with. THAT'S what hits the general economy during deflation - those who hold very little debt love deflationary periods.
Those who _already_ have a lot of liquid cash on hand love it too. It lets them buy the dip on houses while everyone else can't get a mortgage as the banks stop lending.
Those who embrace Bitcoin enjoy regular deflation. Their price to live in Bitcoin terms steadily goes down. Government will be forced to provide UBI to those who can't save. That will be how they transition to a bitcoin standard. It isn't so much that Bitcoin is rising it's that fiat money is collapsing.
Bingo
And it requires massive government stimulus/debt. Which would be way worse than what we are doing now.
Remember 2009-2010?
1:10 As someone from Argentina I still have to see this self regulating nature you speak of.
There are 4 types of economies, developed world, third world, japan and argentina.
Argentina is fucked up. 8oz filet mignon is $2.00
It’s not, Peter isn’t correct in this case.
As an American, I have yet to see this self regulating nature Peter speaks of.
I mentioned this another place, what's happened in Argentina is that the Socialist disease infected the population and the government and so the wrong things were done economically and instead of stopping, they just bear down harder and do more wrone policies and spending when things get worse, so things go from worse to terrible.
Then the "medicine" to fix things is so hard on society, the people ignorantly go for MORE Socialism so it's a destructive cycle downward.
This has happened in EVERY COUNTRY that has gone Socialist and it's very hard to cure the disease in the population, witness India which almost went Socialist and still staggers trying to get on an improving path as the hard decisions today that would make everyone's life better tomorrow are fought by swaths of the population (generally those at the bottom who were getting a little something from the Socialist promises but overall all of society was stagnating from it)
The only American who won't acknowledge this Administration's failed economic policies is Joe Biden. "Shrink-flation' is the least of our worries compared to rising rents and stagnant wages, but it is an undeniable indicator of how bad our inflation has gotten. I have $100k that i like to invest in a non-retirement account, any advice on that?
I would avoid index funds, mutual funds, and specific stocks for the time being. Right now, the best option is a fixed income of five percent. Put money aside for the times when the market really starts to bounce back.
45% of Americans do not invest in the stock market because of lack of guidance. Every year you don't invest, you are falling behind. I’m hitting numbers in the stock market I used to dream of… Going from $50k to $600k in my portfolio is surreal all thanks to insights from my financial advisor.
Mind if I ask you to recommend this particular coach you using their service?
Carol Vivian Constable is the licensed fiduciary I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment..
She appears to be well-educated and well-read. I ran a Google search for her name and came across her website; thank you for sharing.
As a beef farmer, I have never seen any significant increase in what I am paid in the ring for my year-olds entering the feedlots. Yet beef in the grocery store is obscenely priced.
Yet you have not tried to organize with other farmers.
I don't know the details of beef, but I saw a show a couple years ago about the relationship between Corn and Cornflakes. And the corn farmers provided some numbers about just how bad it was for the actual producer.
If I remember right, he was making something like $0.05/box of Cornflakes. All the other money was going to various middlemen. Maybe their "value-add" was reasonable and that's fair... but it sure seemed like giving him another penny from each box would not have made a difference in my Cornflakes... but would have been a 20% increase for him!
@@markpukey8 Thanks for that example. In Germany farmers let themselves represent by someone with a conflict of interest, who works for the sugar industry. Compliant exploitation is common, is my impression.
That because inflation is caused by the government printing to much money. Beef didnt go up but rather the purchasing power of the dollar went down.
Almost like it’s not about supply and demand.
Inflation is not really self regulating, all the arguments for deflation apply to inflation as well. People expect prices to go up, so they start buying in bulk, driving up prices further, workers demand higher wages to keep up with inflation, which means companies have to raise prices to keep the same margins. This is called the famous Wage price spiral. Inflation unchecked can easily lead to hyperinflation which is almost as bad as deflation.
It's worse than deflation, because there is no recovery from hyperinflation without completely replacing the currency.
@@coonhound_pharoah It all depends on how bad it gets in either case and the context in which it is happening. But at least inflation has the benefit of devaluing debt and usually means the economy is growing pretty fast, whereas deflation means the value of debt and debt servicing goes up. You also have to increase debt quite substantially to get out of deflation with lower tax revenues, whereas the fiscal tools to fight inflation involve cutting government spending and raising taxes. You can also keep raising interest rates, in an inflationary cycle vs going into negative interest rates in a deflationary cycle.
@@coonhound_pharoah In a deflation, the economy can adjust. The bad debts on pie-in-the-sky projects are washed out. Companies can survive. Goods are still being produced. Fewer people starve in a deflation. People must move to where they are needed. The under stimulated consumer goods industry must grow, because that is what people need. A new normal is found if the government stops interfering.
A hyperinflation destroys the currency and then the economy. All the best, wisest, most prudent people are bankrupted.
@@coonhound_pharoah Ultimately, in a hyperinflation, no one will take a currency in return for goods and services. That is, that the currency is infinitely debased. In the continental hyperinflation of 1779. the population would only accept Spanish silver coins. The real problem with hyperinflation is that the businesses are shut down. Complex goods are no longer made. No one knows from day to day the value of anything.
Normally, people would go back to specie. But, FDR unconstitutionally outlawed Americans from possessing gold coinage in 1933. The last silver coins were withdrawn from circulation in 1963. Even the solid copper coinage vanished in 1982.
Just look at Germany in the 1920’s
As a 78-year-old, bleeding-edge member of the Baby Boomer Generation, I recall living through a period of massive demand for TVs, cars, and housing caused by the Boomers' spending and household formation. We are going to experience the reverse of that in the near future, specifically here in the US. Looking at the death spiral in the Japanese Economy since the 1990s and anticipating what is presumably happening in China right now is scary. Thanks, Peter, for your daily dose of Doom with my coffee.
No, US millennials will prevent that but everywhere else will have issues.
Actually US is reasonably insulated from these effect due to your better than most demographic profile. If you lived in Germany, Russia, China (plus many more) we might be having a different conversation.
The manufacturers are already on the case, that's why products like tech don't last a dogwatch and then don't work, mostly "Software" issues, EV second hand market is less than ICE!?!
@@albertperks3476 Germany has a better profile than Russia or China because people "want" to go there, controlled immigration is a solution, uncontrolled immigration creates problems for decades as you are no doubt aware!?!
It's funny...no one talks about the 8 million....newcomers...we're seeing it impact our communities and its terrible. Btw that's roughly the pop of NYC
Inflation/deflation boils down to the value of the currency not inputs to commodities, as many seem to think in the comments. I think Peter would agree, Inputs can affect price but that’s not inflation. When the value of currency goes down then it takes more of that currency to purchase the same amount of goods/services (inputs). Giving the illusion that the value of products go up (prices) rather than the value of our money going down. Deflation is the opposite.
Love your videos Peter!!
How could you determine that the value of the currency has gone up if not for the reduced prices?
Peter can't admit that because Peter is locked into the narrative that inflation is not a monetary phenomenon and is not caused by the government and its monetary policy.
since inflation is measured by the consumer pricing index, its difficult to bifurcate the two
@@renaissance17 Yup. Catcanair’s explanation seems almost tautological, because he’s placing all the value on an abstraction (currency). Value is more complicated than that. I’m not saying he’s full of shit, but I think it’s a bad and incomplete explanation without going into demand and utility.
@@MarcosElMalo2 The value of money is based on demand for money and the utility of money.
Currency is not an abstraction, because currency is the physical cash form of the general medium of exchange: money.
With all due respect you don't know anything about economics.
The Fed won’t let that happen. Printer goes brrrrrrr
It almost happened in 2010 and what did they do? Oh no, we gotta print billions and build a bunch of stuff and fix potholes! Fire back up the printing machines! You're correct. They won't stop the printers if they want the patient to survive and continue to pay taxes
To be fair, the US Fed and US Treasury have actually done a FANTASTIC job of surfing the wave of printing our way out of problems and driving inflation into submission.
It's not a perfect world, and they lack many tools, but the reality on the ground is that the US economy is the envy of the rest of the world, and our inflation is under control and our national debt (while abhorrent) is under control, and we're not in a deflationary spiral.
We all want it better... but when you look at Greece, Russia, China, Argentina, Britain or almost any other national economy... would you be willing trade ours for theirs? Probably not.
@@markpukey8 It's nice to be the global empire.
@@markpukey8 Lets not declare victory over inflation just yet, because its not back to 2 %, or 0 %, which would be better. How can you say that the national debt is under control, when interest payments now exceed the entire military budget ? The cost of servicing the debt is rising rapidly, and may soon become unsustainable. at 130 % of gdp, the debt may soon become mechanically impossible to pay back, and that realization may cause a crisis of confidence in the bond market, if normal people stop believing in this debt Ponzi scheme, and stop lending to the government. Comparing the US to Russia is silly. How about comparing the US dollar to Bitcoin. Now that we have a currency that cannot be inflated by government or anyone else, maybe we can do better than Greece, Argentina, or even the old US, by just slaying the inflation beast once and for all, with technology !
@@markpukey8America has so many things wrong with it. But it’s still is the prettiest house in an ugly neighborhood 😂
The way the US government spends money, we will never have deflation
Good. Deflation is bad for economies.
There are a number of "Black Swans" which could kick our economy into a deflation. The governments can miscalculate.
You are correct in one sense, a constantly spending government is more apt to drive us into a hyperinflation.
Bro, you literally just ignored that entire part about supply and demand
@@mitchconner403 supply and demand has to do with markets. Skapur was talking about government induced money creation.The Federal Reserve Bank has done a masterful job of slowly decreasing the purchasing power of the US Dollar over the last century. But... nothing last forever. And.. the FED is slowly running out of options. The debt is too high. The interest payments are too large. The FED has limited tools.
Fiat money requires the faith of its victims to stabilize it. What will happen when that faith has vanished?
@@mitchconner403 supply and demand are irrelevant when a country prints money with full abandon. The US has been doing that for some time and shows no sign of stopping.
Yikes, a smart guy like Zeihan does recognize the role of money supply in inflation and deflation!!!!
He is a tool for this administration.
@@synewparadigm Peter never outgrew his man bun. All his reasoning about gold is Keynesian. He talks about a gold clearance problem which has never existed. But, since the people at the FED are all Keynesians, too, he is a check on their thinking.
According to Austrian Economics, a deflation nothing to be scared of. It is when the bad debt and distortions in the economy are corrected. The FED has been distorting our economy since 1913, so a deflation would be chaos for a while. But, it is good chaos. The economy would realign to providing what the people need, not what politicians and bankers want. Big business and big government would vanish if they did not serve the consumers.
The Great Depression was prolonged, because the FDR administration would not stop interfering in the economy.The US economy was about ready to recover in 1935 and again in 1937, but new government programs kicked in.
You have to remember what got the US into the Great depression. The Bank of England had a clearance problem. World War One was very expensive, so naturally the British Pound would drop in value to reflect that. The Bank of England wanted to prop it up. They found a willing partner in Chairman Strong of the New York FED. The NY FED bought British Pounds with newly created dollars and this imported inflation into the US money supply. America went through a real estate bubble and a stock market bubble which crashed in 1929. Since then, the Government couldn't keep its hands off the economy.
*doesn’t
Peter is speaking of economics.
Money Supply is a Politial decision, made by politicians in a diseconomic manner.
Sit down in a quiet place until you can see the difference.
@@generalsupreemo9776political, which has economic effects.
I think you're confusing currency inflation (government created by printing too many dollars) and price inflation when demand outstrips supply (often caused by government meddling through embargo, tariff, etc). These are very different problems with very different causes. Deflation generally occurs when market forces "correct" the problem of excessive currency inflation. This is the "boom/bust" in various country's economies and poorly explained in history classes.
Deflation isn't a correction a much as a downward spiral.
Inflation also occurs when there's few competitors to pull down on prices, which enables a price-profit spiral.
The real booms and busts come from basing an economy on limited-quantity media like gold, which has the inherent problem of getting spent/hoarded at exactly the wrong points of the economic cycle. Every money issuer converged on fiat because it allows for countercycling the money supply as necessary.
@@doujinflip Wrong. Every currency issuer converged on fiat because it makes possible the funding of total war and endlessly increasing government debts. It makes it possible to depress the rate of interest below the real market rate.
Being on gold does not cause business cycles. Being on gold and also being fiscally irresponsible does, however.
The term "inflation" is a umbrella term denoting both currency inflation and price inflation. You are being needlessly pedantic. Same course for deflation.
@@coonhound_pharoah Lay off the tinfoil. Gold inherently limits economic growth. That is why it was abandoned. Growth is primarily driven by lending. Gold inhibits lending. Not to mention if a country wants to grow it's monetary supply it needs to literally conquer others. That is why Rome endlessly expanded. That's why Spain did it. That's why the UK did. Gold was a greater propagator of war than fiat ever was.
@@coonhound_pharoah you make the mistake of thinking humans are rational and responsible. We are not. Both economics and even Religion teach that fact.
If Japans economy keeps the same size while the population shrinks it could be considered a success
It is. They're managing depopulation and inflation at the same time.
And with only like 1000% dept to GDP😂
how is depopulation a good thing?
In Canada our gdp went up, but per capita it went down. Citizens are poorer. How is this a good thing? WEF crud from a fed.
@@beibei93You mean Detroit is not a success story? 😉
Deflation along with depopulation is a very bad combination.
Deflation would be temporary. Maybe five years. We have a hundred years of distortions to the economy from an easy money policy.
Depopulation requires that you de-urbanize and de- industrialize. Crowding people together in apartments caused people to not have children. Technology may help here: 3-D printing, smaller factories in rural locations, etc
There may have been too much manufacturing etc in the 1920s but let's not ignore the irresponsible banking practices that fueled this boom in manufacturing and consumption. Dig deep enough into any economic issue and the banks are always the root of the problem.
he won't say that and he wouldn't give a correct definition of inflation because he's running a narrative
Some thoughts are verboten if you want speaking engagements.
Don't forget the rash of tarrifs the world over.
No, government getting into the deceptive counterfeiting, i.e. inflating the money supply is the ethical deficit at the heart of the fantasy of creating $ out of thin air.
And who controls banks? They are the issue.
Why would anyone in America worry about deflation when the Federal Reserve exists?
That is how you know this guy is a warmongering shill.
Because they looked at Japan and don’t want their economy… You can learn lessons from someone else’s mistakes not just your own.
@@icey_b1562exactly… the Fed “prints money” but that money never comes to fruition in the real economy unless banks lend it out. Until then it’s just an asset swap where the fed gives banks dollar reserves in return for their treasuries and other securities. We can experience deflation in the us if the money velocity slows enough in a recession like Peter is talking about. However, the PPP loans and stimulus checks in 2020 show us that the government is willing to use unusual circumstances to write new policy that keeps the system afloat. My guess is the US will do whatever it takes to keep its reserve currency status but not sure how that will play out
Japan has its central bank too and nothing stoped them from slowing their economy down to a halt.
@@pinguman13because they weren't willing to sacrifice the yen by printing like a drunken sailor.
I’m old enough to remember when Zeihan was telling us that 10% inflation was “baked into the cake” for the next several years.
In Western countries that is true, not in China though.
I see a lot of people confusing disinflation with deflation and misunderstanding the seriousness of the issue.
I had to look up the difference between deflation and disinflation. You are correct. We haven't quite hit disinflation yet, but I think prices are nearing their peak. I don't really see how deflation in any meaningful way could happen in the US, at least not to the point of where our economy is damaged. Americans like stuff. They love buying new stuff. And our Fed loves printing $ so we can buy that stuff.The only reason I can think of deflation happening is if the middle class gets completely sucked dry of most of their money and savings, and companies start mass layoffs. If we ever hit a period of deflation, I'd invest every penny I had in cheap stocks and property.
@@smileygladhandsthis is interesting thing and logical considering less demand for goods.
@@smileygladhandslook at the issues going on with commercial real estate office space now but malls took the hit in the past. Because of online shopping and now AI. The next thing to get hit is college degrees as AI destroys knowledge workers jobs then gets applied to education of new knowledge workers at a fraction of the costs of a degree
@@kevinrussell1144Does the economy really care if "men decide they are women" if their economic impact remains comparable? Saying otherwise sounds like a reach. I can agree that "degeneracy" of a culture (regardless of whether that statement is viewed as an emotionally valueless negative vector or not) can occur when economic inputs change, but the alternative might be interpreted to justify removing personal freedom and putting boots on necks.
@@kevinrussell1144I guess I will have to do some reading, but I don't think the relationship between Money Supply and prices within an economy was well understood back in the 1930s. I'm pretty sure that at that time and maybe into the 1970s, when people, including economists referred to deflation, they did indeed mean falling prices. It seems it was only during the seventies that the ideas of the likes of Milton Friedman really gained traction and the right people became cognizant that price inflation and price deflation could be ameliorated by central banks controlling their money supply. (Suitable fiscal policy is also necessary, but, well,... politicians.) Anyhow, that's my understanding.
Maybe ammo prices will deflate
That's just conservative politics inflating if not inventing threats they say you can 100% mitigate with a gun, in accordance with the interests of their gun lobby donors.
Pretty much seems to be happening, at least in the emailed advertising...
in my dreams bud, in my dreams
Oh no, the Deep State wants that to be HIGH.
We can only hope.
Love the Colorado mountains, but that was the best background yet!
Monterey Bay is such a pleasant coastline to enjoy. Plenty of otters!
@@Mcfunface Yes, I was fortunate to live in Monterey back in the 80’s. I have fond memories of it including being woken early in the mornings by throngs of barking sea lions. Take care.
Sell regulating? Tell that to Argentina! When governments print money, nothing can stop inflation.
Argentinean here. The rampant printing of money is an absolute catastrophe. We're talking +50% poverty and 250+% inflation. Please be careful and never walk down the path of the demagogic socialism
His job is to spread the endless lies of the government while providing cool and interesting facts.
@baronbar5894unless its housing, where companies can buy out huge swathes of homes, making them expensive and can increase rent as much as they want 🙄
@baronbar5894 Are you actually serious or just trolling? My country had TWO hyperinflations without any war because of this asenine mindset. Inflation is not self correcting, it can spiral out of control very hard and very fast leaving a tidal wave of poverty in it's wake.
@@iSlowhands Pete also mentioned government putting its finger on the scale. This isn’t an inherently bad thing, but it can be abused. Printing money isn’t the problem. Printing too much (or not enough) is the problem. This is why you want careful but not overly timid monetary policy managers and representatives that can think long term.
Ask Zimbabwe and Argentina whether inflation is self regulating. Deflation just makes the super rich just regular rich.
I challenge zeihan to give us one valid example of this mythical deflation spiral bs
China right now.
Peter does a pretty good job explaining Zim and Argentinas inflation, so I won't, but neither Zim nor Argentina are always upwards spiraling ever higher. I was in Zim in 2014 and bought their million, billion and trillion notes as souvenirs for less than $5. Everything was comparable in price to the US then. Of course it has all spiked again recently, but that is because of corrupt government mismanagement.
Inflation is like the fire triangle. No triangle means low or no flame.
Deflation is like the Death Eaters from Harry Potter. It doesn't burn itself out. It's bleak, hopeless and helplessness that is, its own fuel.
I'm no expert, but the insane inflation seen in cases like Zimbabwe and Argentina are often the result of monetary mismanagement, which shouldn't be coupled with basic inflationary forces. If you keep printing money, of course there is no way the system can self regulate given ever increasing supply. Typically, in cases like that, it becomes a more complicated dance due to dollarization.
@@kalingbf5362
You may or may not be an expert, but you're definitely well on your way to having a pretty solid and reasoned understanding of the matters. Take care
Weird that he didn't mention recent increases in the money supply as a key driver of inflation. It's not all supply versus demand.
He didn't say it's all supply and demand. Careful with that word "all".
America has many things to worry about.
Deflation is not one of those things.
Yeah, our 20s and 30s year olds are spending.
The only deflation we may see is housing but that seems not be happening. My area housing above 600k is experiencing deflation but house under 230k are experiencing inflation by 60% to 100% in the last 2 years
You may not want deflation but deflation wants you. It is held at bay by the enormous efforts of the Federal Reserve Bank. No human is perfect; mistakes happen.
Does America worry when China collapses?
The price of electronic good has 'deflated' massively over the past 50 years. Not a problem here. Prices come down shows we're becoming more efficient at making stuff.
Great brief. Thankyou. Respect from Australia
I'm worried about the rising prices of EVERYTHING
Are you worried about rising prices or the rate of the rise?
@@MarcosElMalo2the purchasing power of my money compared to previous eras
I have been teaching about inflation/deflation this week to my high school kids. They were very confused about why deflation was bad. You took the words out of my mouth. I spoke about why it was bad and used both Japan and China as examples. Crazy how that happens sometimes. Thanks for the vindication.
deflation is good for pensioner with fully paid house. for everyone else not so good.
The kids are right. Inflation is theft. Deflation is the natural good order of a sound economy. Fix the money and deflation is no longer a problem. The youth are embracing Austrian economics through Bitcoin. Wise elders are as well.
The point about deflation that he forgot: If other systems are inflationary while yours is deflationary, you can offload your supply albeit at a significant discount to at least have some degree of reset once equilibrium is achieved. Does this save China? Not a chance, but it does keep them on life support for longer than his 10-year projection in my opinion.
@@Violett6969I think the western world is wiser to Chinese product dumping now.
Deflation isn't bad. It's the normal state of a growing economy. As goods get more plentiful, their prices should fall. The current state of monetary policy is the only reason inflation is a permanent feature of the economy.
Inflation is desired by policymakers because it makes the money they pay debts with worth less, and because while "number go up" because of inflation it is easy for even the most incompetent boob to make an ROI and keep people employed.
Deflation just makes managing a business harder and require more skill. But it also results in less waste in the economy and better standards of living for the people as a whole.
Thank you Peter for briniging things to our attention almost no one else does, at least not at scale or with as loud of a voice. These are much needed bits of info that should be kept in everyones back pocket.
He's literally just parroting central bank talking points, at least with regards to deflation and inflation, which means he gets them wrong.
Peter (again) the support Peter seems to give to the current establishment doesn’t go unnoticed. “Inflation is actually GOOD for us!” Exactly something this administration would say as people are incrementally priced out of homes and struggle to buy groceries. Sheesh
Can you timestamp when he says that? Thanks :)
Isn’t the fact that Japan is still in the the top 20 countries for standard of living proof enough that for developed countries at least a constantly growing economy is not necessary?
i agree with you
If you’re not going to have continual growth to throw money in problems, then you need to have a cohesive society that is meaningfully civilized.
yes.... having stable GDP level (As long as that is used to estimate loan payback ability) is needed but other than that, less people, same result mean better productivity and less cost (eg less schools, less healthcare needed in total)... this is situation companies constantly target to have higher profit level.
Governments are terrified of deflation because it requires competent management, fiscal discipline, and civil cohesion to make it through with minimal damage. Something most western governments are no longer capable of, and they know it.
Deflation is a bigger issue than inflation because it requires competent management, financial discipline, and intelligent policy to make it through. Our government has become so hybridized with the "infinite growth" shareholder class that they are no longer capable of these things. Watching our government flail during covid and turn on the money printers made me realize how little understanding of economics there is in the highest levels of our policy making.
Been to Japan in the last 30 years? It's always been pretty nice. Bring on deflation, and price controls. Corporations are not the common man. Deflation can be great, it's a symptom not a cause of problems.
Then why does some periods of inflation last for so long? How is it 'manageable' if it last for years?
TH-cam Ray Dalio How the Economic Machine Works 38 mio. hits. 75/100 year cycle. Grand solar minimum. 9×11, 198, 396, 2×396 years. Old Testament, 2,000 years. New Testament, 2,000 years. Friday, April 13, 2029. Milennial Reign of Christ. 2,000 years. The End
@@BeechandBook While i agree that Zeihan is biased (who isnt), your conspiracy theory is way overblown.
The 4th Turnning is here. British glorious Reoluzion. American revoluhionary war. American civil war. 2nd world war. Friday, April 13, 2029, Asteroid Apophis flyby. Cycle: around 83 years
@@Pyrioldhow many intelligence agencies and State Department contacts do you think he has?
He explained that pretty well.😅
I've been watching Peter Zeihan videos for years and rarely find anything to disagree with. Today, however, he scored a big zero in economics. He seems to confuse deflation with recessions. The United States had a deflationary period from the end of the Civil War to the beginning of World War I. The 1920s were not deflationary and the Great Depression was not due to deflation.
Similarly, Japan's stagnation over the past 30 years is not an example of deflation. Instead, it resulted from a property bubble that collapsed in about 1990 and the failure of the government and banks to properly respond to that collapse.
Zeihan seems to confuse the increase or decrease in the price of one good with inflation or deflation. Inflation isn't an increase in the price of one good; it is an increase in the general price level and it is not self-regulating. The same with deflation, but the negative impacts of deflation are far less worrisome. Given a choice, I would prefer to live in a deflationary period than an inflationary one.
It seems like Deflation would be Great in Food, Housing, and energy to start.
This Rapid Inflation causes a lot of pain.
Plus
Deflation lets us pickup Great assets at Bargain prices.
Yeah no your wage might also go down, or you may lose your job
If deflation would happen on that scale, you won't have any money to pick up great assets at bargain prices. It's just going to be the ones that already have money that would be able to take advantage of that.
@@sonneh86
Many people LOST their jobs, or were not hired due to wage inflation.
People can lose jobs also due to deflation.
Wages don't often go down, but anything is possible.
Hard assets like Real estate will go down.
But that $$$ under your mattress, will buy a lot more at the grocery store..
Inflation is just theft of your $$$ in most cases.
Deflation has its negative side also.
@@midnite1235 one other critical point of deflation is that debt burdens get heavier
@@Blondul11
That is true..
but people with cash now,
are losing purchasing power..
Of course Peter is a Keynesian
You keep checking those boxes Peter keep it up
If it wasn't for Chinese deflation, we wouldn't have Temu. 😂
I wonder if its parent company PDD kinda wants China's deflation to continue, since apparently they're hemorrhaging money at something like USD 10 _per item_
somehow worse than wish. Its amazing to me how China is just OK with being synonymous with super low quality anything and copying.
@@MicroSBsbecause they know Americans are getting desperate and they can get away with it plenty of Chinese products are high quality hell the phone you're typing on it's probably made in China in some part if not China a sinosphere country
@@geocam2 China and Junk are the same word
@@MicroSBsyour cell phone was constructed in China
Hands off markets and they heal,
Intervene and you get market pathology.🇦🇺
Thanks Peter.
I understand this is the traditional opinion on deflation but I dont see moderate deflation as a bad thing. Similarly to inflation, its a tool which disincentivizes debt, decrease assets prices allowing for greater asset ownership (namely houses) and decreases wasteful consumption among other things. Moderate 2% inflation and deflation both provide benefits, its only in the extremes do people start getting priced out of the market.
I think both should be weighed via their benefits and opportunity costs rather then this "Good vs Bad" view
The system is a sham. The thing about inflation is you are inflating what has already been inflated over and over, just adding it on. We never see a reprieve. So we continue to inflate until all of us are millionaires, or have to be. Already seeing it in the housing market.
Lover’s Point - good choice for a video location!
we also taxed the shit out of the 1% to get out of the great depression. like 80%. we can do that again.
Too bad I can't give two likes
Was the talk to the Naval post grad school recorded? Can we see it? Please?
Need help sleeping?
Don't forget that technology adoption is deflationary too...
Greater efficiency is not deflationary. People are actually spending more dollars than previously for computing power because computing power became cheaper-it has become almost a consumer commodity. Technology creates new demand.
@@MarcosElMalo2 Wrong. Yes, it is deflationary. Increased productivity means more goods produced with equal or less cost. If more goods are produced and the money supply stays equal, then the ratio of goods to money increases. There are more goods and less money available to chase each unit. In other words: deflation happens.
Productivity and efficiency are, always and everywhere, deflationary.
People are spending more dollars on computing because of demand driven by AI and other new tech.
@@MarcosElMalo2 Tedious data: Back in the 1980s something as simple as improved HVAC filter technology saved one FTE due to reduced DUSTING. 'Computerized Cash registers" with scanners increased checkout through-put by 50%! Register staff was cut in half. I had 4 people ordering books by manually counting inventory and making checkmarks on forms-- all gone with automated ordering. In a later career (post '94) each 4-person (avg) analyst team had an admin to do expense reports and travel arrangement, and (paid for) 4 FTEs in the phone center. Esch Service (4-5 teams) had an editor and graphics person. By the time I left (2011) EVERYTHING was self-serve... 5 editors and graphics staff for 500+ analysts. No need for admins as we did our own expense reports and travel booking online. We shifted from mailed-out hardcopy to electronic distribution--- lost a bunch of no-longer needed talent (100+, IIRC). My employer went from filling 5 bildings to having a lot of room in 2-- no clue on TOTAL headcount. Most unskilledand semi-skilled jobs are going away, and even skilled-trade jobs are vanishing: the real impacts of improved design, automated manufacturing and quality control are just beginning to be realized. We are on the verge of “permanent, never break, never wear out” technology, with only incremental improvements unnoticeable to end-users remaining. White collar has already been affected. I distinctly remember the impact of things like Quickbooks on the accounting community… MSFT Office killed off far more low-level white/pink collar jobs than it created.
@@MarcosElMalo2 Most unskilledand semi-skilled jobs are going away, and even skilled-trade jobs are vanishing: the real impacts of improved design, automated manufacturing and quality control are just beginning to be realized. We are on the verge of “permanent, never break, never wear out” technology, with only incremental improvements unnoticeable to end-users remaining. White collar has already been affected. I distinctly remember the impact of things like Quickbooks on the accounting community… MSFT Office killed off far more low-level white/pink collar jobs than it created.
As is firing workers and replacing them with AI.
I'm not as worried about deflation as Zeihan. I think that deflation is also self correcting, just on a longer time frame. He talks about how the only thing that really saved the world from the deflation of the Great Depression was the Second World War, but I think that is no coincidence. War is a political tool to combat deflation. In democracies people vote in extreme parties, either the hard left, the Communists, or the hard right and both eventually choose war to stay in power.
What I worry about is that the USA, indeed the entire West has accumulated a wartime debt in a time of peace. Deflation is absolutely coming. We haven't had as large a contraction in the money supply since 1929, so we're going to have a depression. As Steve Hanke says "It's baked into the cards." If government debt to GDP rises to over 100% then that debt can only be inflated away (unless they default). Inflation is in reality just the devaluation of the currency.
Inflation is actually easy to achieve, as a government only has to continue to pay government employees more. The reason that Japan didn't do this was a choice - a very bad choice as is evident by their demographic decline. I suspect that the reason that they did not was that Japan is a massive lender to Asia. They're now seeing some inflation probably because they see a depression coming and will not be able to lend.
Back to high government debt in the West. The reason that this is a problem is that it positions the government poorly. How does it create inflation when the economy is contracting with incredible force? It can't expand the state's percentage of GDP if, as now, that percentage in the West is already at record levels. It can't afford to go to war. It's hands are tied and countering extreme deflationary forces becomes extremely difficult without altering the society. The West is in a very bad situation, but at least we're not the rest of the world!
Wow, I went on forever. All the best everyone.
Just buy Bitcoin and enjoy the wild ride.
You are outstanding at explaining sometimes-complicated circumstances. Which is what we need from teachers.
It's too bad he hasn't got a clue what he's talking about.
@@coonhound_pharoah Remarkable how many people are convinced Zeihan doesn't have a clue, but listen to him anyway.
Unfortunately, any teacher who is paid by the government is likely to spout the dictums of his/her master. We need to separate the government from many things in our society. Lately, the FBI was paying twitter to censor opinions and viewpoints. It is contrary to the 1st amendment for a government agency to do that.
Hey Peter, Thank you for these small videos. I love them! Maybe a question you could answer: since you are there, what do you think of California economic, politic and environmental evolution?
That's a big'un.
I'm not as smart as Peter, but I do live in CA, so I have an opinion.
Economic evolution - we're going to remain a massive engine of economic growth. We have hard coded advantages that other areas will find hard to duplicate. i.e. Silicon Valley loves engineers that job hop and startups that fail. We reward these people with more funding and new jobs. Not always true in MA or TX. Forget ag. Everyone grows crops... our soil means we will stay huge... but innovation in farming...? Who knows.
(side Economic note - I wish we'd allow more fracking. Our gas and oil prices are about 20% higher than the rest of the country and WE HAVE lots of oil and gas but refuse to allow production. On the plus side, when we are finally forced to allow it... the technology will be a decade cleaner and more efficient.)
Politics - The libs have won. I happen to be one of those libs, so I like it. But the fact is that CA will remain a testing ground for liberal policies for at least a few decades more. Our polices are geared to making life better for EVERYONE who lives here, and working well. Who knows how well they will work if we are forced back into some major austerity decade? I'd rather live here than in Alabama or Missouri.
Environmental - If your goal is less damage and more conservation, CA is a good place to be. Even our 'growth' policies try hard to minimize environmental impacts.
@@markpukey8 Thanks for your analysis. Quite contrasting with the "California is doomed because of homelessness!" :)
The invisible hand says “hey!”
Gonna tell Adam Smith to shut up.
Meanwhile, the other invisible hand (unless the invisible man is an amputee, he would normally have two such hands) is busy engaged in self-stimulation.
@@bryanjackson8917 Perhaps you might speak to the deflation which inevitably occurs after self-stimulation.
Which then inevitably leads to another round of inflation which builds and builds and only ends when there is a sudden release of these inflationary pressures, and so on and so forth.@@rickb9327
The invisible boot also says hi
The bubble in Japan was in the 1980's. The wheels started coming off in 1990.
My man here, looking like he’s part of the end credits for 80s Dune. 😂
In a true free-market both Inflation and deflation would self-regulate. However, we (and nearly all of the world) do not have a free market. Governments over tax, over regulate, over spend, and over manipulate the market in ways that lead to nearly all of the economic problems we (and the world) face.
From India here, i am more worried about Shrinkflation that's happening here, every product has been skimmed a good 20% and i don't even know if they will ever fix that, it just feel morally wrong to buy these products knowing their sizes from 2 years ago, while a lot of cheap Chinese products are being dumped in the Indian market due to the deflation in China.
Great and simple explanation!!!!
Deflation also seems self-regulatory: if consumers expect falling price, they buy less, companies produce less and when consumers eventually buy, demand exceeds supply, which stabilizes prices.
It *isn't* self-regulatory. People don't seem to grasp this all too well but deflation traditionally includes *the price of labor* falling as well, and (as Peter pointed out) it's _exceedingly_ difficult to raise demand once wages and salaries start falling. That is what usually happens in a deflationary environment: first people buy less by choice (because prices keep falling), then by necessity (because _incomes_ start falling, because prices keep falling).
The crucial oversight most people have when discussing deflation is that they assume prices fall but wages somehow won't.
Okay, I see. Thank you for clarifying it!
@@nicolettileoThis also self-reinforces even harder in economies with a lot of debt. Debt isn't necessarily bad, but in an deflationary environment, you're now spending more in real terms every month to service your debt. Which pushes prices even further down.
Yes the market will correct itself. The trouble is the fungible item that fluctuates in availability and value. The fed note. It's like building a skyscraper with a tape measure that the increments change constantly. Ron Paul talked about it.
@@korayven9255 And the crucial oversight people have when asserting deflation is self reinforcing is that prices have a lower bound of zero but have an upper bound of infinity.
In other words, price wage deflation spirals are a myth, but price wage inflation spirals are real.
The California coast is so beautiful.
In the 80s it was boom boom boom NOT the 90s. In Japan.
The bottom didn't fall out in Japan until 93-95. However, back in the 80s, it did seem like Japan was destined to be the #1 economic superpower with no equal.
@@ZFPAkulano, Crash was in 1989. In the 80s banks were careless with loans which created a bubble that bursted in 89. Look at M2 data, Japan did what US is doing since 08. But Japan was no US, they did not have a currency like the dolar, the trade currency.
It was a late 80s bank crisis that left zombie banks. Gov't didn't have the guts to close them, like Sweden or USA - S-n-L. Bush/Obama were too scared also...
@@cadumgarcia My favorite was the fact that various Japanese companies owned stock in other companies: It would be like GM owning stock in their raw materials suppliers AND owning stock in many of their dealers, while some of their stock was held by their vendors and their dealers, hence "Japan Inc". The stock got purchased when it was sky high, and was carried on their balance sheets at those high valuations. When the bottom fell out of their stock market the stock these companies held was nowhere near their valuation, putting a lot of these companies into a dubious financial position vis-a-vis their loan covenants.
@@richardthomas5362 Yes, I saw that in various documentaries about Japan's bubble. I also read where banks would borrow against land ownership with the assumption that land prices would only rise.
Great explanation, thanks. Beautiful day at the Cali coast too.
It's Monterey. They're ALL a beautiful day at the coast!
Cold... and windy... but beautiful.
Wow, I've never seen Peter just flat out wrong before like this. Inflation has nothing to do with consumer supply and demand. It is wholly a function of the Money supply. When the Fed prints more money and dumps it into the system, you have inflation. When they pull money out, that's deflation. That's it. Yes, as that money gets dumped into the system, you have supply and demand changes, but that's the tail wagging the dog. It's not the cause. The Fed is the cause of all inflation (In the US - in other countries it's whatever government agency prints money), people cannot self regulate or self correct inflation with their spending habits.
That is partly incorrect. If there are supply shocks, let's say all cows die of disease, milk supply crashes. In a local economy you will have milk price inflation because the unchanged milk demand will now have to outbid each other much harder for a much more constraint supply. Milk prices shoot up. Milk price inflation. I would even argue, what you describe is currency debasement not really inflation. Of course this is splitting hairs, but in your scenario the money becomes worth less, so prices do not really go up, just the number catch up rebalance. In my milk scenario you literally have to give more of the same thing.
@@evilluhmich Incorrect. Prices of individual things go up and down all the time for various reasons. That's not inflation. Inflation, definitionally, is the price rising on ALL things in an economy, not one or two here and there. That happens only when you increase the money supply. That's the definition they taught us in all my economics classes when I got my economics degree.
"Inflation has nothing to do with consumer supply and demand. It is wholly a function of the Money supply. "
Wrong. Everyone who says this is just playing around with definitions. If I have 1 apple and 50 people want an apple, that causes prices to rise if I used to produce 50 apples. That is inflation. ANY time prices increase, that is inflationary. You are just redefining words to suit your needs.
What you are doing is no different than when people try to redfine the word racism as meaning "privilege + power". Personal and arbitrary definitions are not universally accepted.
"That's the definition they taught us in all my economics classes "
I hate to break it to you, but what you are taught in a classroom doesn't equate to truth.
for (healthy) central banks, money supply increase/reduce is a response to control inflation; they can steer a bit the wheel but cannot control the global trends of the "real" economy, Peter says; finance is only one of the factors, but not the main
That happened for many in the Real Estate industry from Contractors. Builders Investors Suppliers Lenders The Tax base disruption to cities and states in 2008 Plus. No one was making money but their obligations remained the same. Then People Lost. So this has happened.
Sounds great! Let's deflate!
Hey Peter, thanks for the video. Interesting as always. I was wondering if you or someone here in the comments might be able to comment on why there are some cases of inflation that don’t seem to be self-limiting. For example, famous cases like Germany after WWI, or Zimbabwe. Much appreciated.
I'm not sure, but I believe german inflation in the 20s happened mostly because the government had printed money to pay for WW1, war reparations and so forth, while millions of soldiers came home all at once, searching for jobs and thus lowering average wagesby PPP and as a result demand.
Hyperinflation tends to occur during a period of economic turmoil or depression which is then exacerbated by a govt printing more money than its economy can support. This can result in soaring prices causing people to hoard, creating a rapid rise in demand chasing too few goods. The hoarding may create shortages, and thus aggravate the rate of inflation. It’s a severe mismatch between money supply and economy growth.
The reason is because "inflation is self limiting" is incorrect and wrong. In reality, inflation is self perpetuating. As inflation rises, inflation expectations rise. As inflation expectations rise, money velocity increases (aka, the demand for money falls). As the demand for money falls, prices continue rising, and inflation expectations rise higher.
There is no such thing as a deflationary spiral. It isn't a real thing.
Because the credit creating monopolists do not want governments creating money out of thin air. They control all international settlements. As soon as the money isn't debt to them they don't like it. Colonial scrip and green backs are great examples.
The cure for Deflation is free market and innovation. People will always want to buy useful and valuable things for a better life, health, leisure, etc.
A little bit of deflation can be a good thing, but when people start hoarding cash because they expect prices to continue to fall, that’s when you get the death spiral.
good thing company's are now at the point they no longer can improve products and instead cut corners to rise profit.
Open markets are good, but the term “free market” seems like a version of the Christian Heaven or the Marxist Workers’ Paradise. Capitalism as dogma is like any other religion: designed to benefit a very few. Instead, view capitalism as a social tool that creates value and (over the long term) distributes goods and services most efficiently. So far it’s the best tool we have for that purpose, although it could be improved. Socialism is also an economic tool. Do you know how to improve socialism? You make it more like capitalism, and you keep improving it until it IS capitalism.
@@SonnyBubba people won't hesitate to spend money on something that improves their lives, the job of capitalism and the innovation is to provide it. The big problem is how will you preserve the system with all the debts.
Deflation is a return to free markets and innovation. And sound money. It is a reply to the inflation of the money supply caused by the Banks and the government.
Peter, based on your understanding of American economics, the patterns of American consumers, and the history of the housing market(s) within the US, do you think housing prices (nationally or within specific regions) will dip significantly anytime within the next 5 years? Would you mind laying out your reasons as to why or why not? Thank you!!
Inflation is always and everywhere a monetary phenomenon. Wiuld not deflation be the same?
If everyone gets depressed and stops buying things that can be a cause of deflation.
That’s a bold assertion. I mean, yes, monetary systems are likely the usual reason. But always the cause?
I am no expert, but this sounds more like orthodoxy than fact. I suspect there are other possible causes.
Fortune magazine (Jan 20, 2024) had an article of some economists arguing that corporations taking higher profits drove our most recent inflation. I don’t know how valid that is but at least it is not a settled debate.
I can imagine other things driving inflation.
I remember reading once that the inflation after the 1340s black plague in England was significant.
I imagine an unstable government could make people afraid of holding money and look to buy goods to hold their wealth in something more stable.
I suspect a large natural disaster or a war would also cause chaos and could drive inflation (or deflation.)
It’s hard for me to accept that there is only one possible cause for something as complex as inflation.
@@chrisbuhler3686you're completely correct, it is not a simplistic topic to be boiled down to a single cause.
The Federal Reserve Bank is doing everything it possibly can to prevent a deflation. The FED has kept this boom and bust cycle going since 1913. This would be uncharted territory for them. Life as we know it would end. They would have no power.
If our economy went into a deflation, the Federal government would no longer have the credit for new projects. Hell, it might not be able to keep its current projects going. Washington DC could return to being a swamp. The lights could go out all over Washington.
The question is "What can the FED do to prevent a deflation?" Our Economy is so distorted that it wants to correct itself; enormous effort is employed to prevent it. What if the FED makes a mistake?
@@chrisbuhler3686 There is only one cause of inflation.
It's only hard for you to accept because you have no clue what inflation actually is.
Improvements in productivity and transportation can help reduce the cost of manufacturing products. When the cost of manufacturing goes down, the producers have the option of lowering their prices, which would stimulate demand, which could lead to more people getting hired instead of people getting fired, inflation is not inherently bad. What is the cause of the inflation? The Great Depression was made worse by government intervention. AI has the potential to reduce costs dramatically.
Yeah, by putting everyone out of work. Don't forget about state surveillance while you're at it . . .
That was a terrible explanation. Inflation is not a function of supply and demand. Inflation is expansion of the money supply. Prices haven’t been going up crazy the last few years because of increased demand. We just have far more dollars chasing the goods so prices have gone up.
Thank you.
Sometimes, I wish I had uni-dimensional thinking. The answers are all so simple and obvious, "inflation is due to money supply and NOTHING else." ahhh, if only life were so simple, it would be boring, but simple.
Having “far more dollars chasing the goods” is higher demand by definition. The expansion of the money supply is an affect of inflation but not necessarily a causal factor as the money supply can grow without inflation to due other factors. Prices have been going crazy the past few years due to 1)corporate advantageous pricing, 2) supply side: reductions in available goods linked to China’s COVID response that is still working g through the system (particularly in shipping), and 3) demand side: consumer’s price inelasticity. People will scramble to pay whatever they can afford for necessary goods when they have the expectation that prices will continue to rise.
@@Flexican409 points 2 and 3 are NOT inflation. Those are just price changes on supply/demand curve. Inflation is when everything is going up in price independent of supply/demand because the purchasing power of the medium of exchange went down in value.
@@peterwarner553 It actually is that simple, because price changes caused by non-monetary factors simply do not qualify as inflation.
Janet Yellen among other Reserve bankers did a study on deflation: “… the only episode in which we find evidence of a link between deflation and depression is the Great Depression (1929-34). We find virtually no evidence of such a link in any other period. ... What is striking is that nearly 90% of the episodes with deflation did not have depression. In a broad historical context, beyond the Great Depression, the notion that deflation and depression are linked virtually disappears.”
"Inflation tends to self limit while inflation self reinforces" is that factual? are they not both self reinforcing?
I thought the Wage-Price Spiral is a pretty well documented phenomenon, but I am not an economist.
The ingredient you are missing in the wage price Spiral is the expansion of the money supply. That spiral can only happen if money supply expansion is used as a tool to address it. If you look at examples in history where they have been wage price spirals it's usually preceded by a period of deflation.
Listen again to Pete’s explanation of the different mechanisms of each long term trend. Inflation moves towards a new equilibrium between supply and demand. Deflation self-reinforces because it reduces demand which has a negative effect on supply, which in turn reduces demand further. It’s a vicious cycle.
Now the equilibrium Peter talks about is misleading, because it suggests a static point of balance, like the fulcrum on a scale. The truth is that it’s a range, not a point. Low inflation means the range shifts more slowly and change is more manageable. We don’t reach a perfect balance, but relative balance without wild swings (hopefully).
I don’t know how well I explained that, so watch Pete’s explanation again.
You say you don’t understand economics, but you can and should remedy that. I understand your resistance. It seems boring and overly difficult to study it. It can make you feel dumb at first to tackle a new subject. But you’re not dumb. It might take time and effort, but you can spread that effort by studying 20-30 minutes a day. There are free university lectures online. It might be worth it to buy a used copy of an economics 101 textbook (you don’t have to buy a new copy of the newest edition).
@@MarcosElMalo2 This would be true if consumption drove the economy, but it doesn't. Production does.
I suggest learning real economics, not the government propaganda taught in universities.
Wage-price spiral is a myth. It’s all about the money supply.
Economists think there is a big difference. They are wrong. If people expect prices to change significantly in the future, they make bad choices. If prices go up or down and you give greedy people a reason to be greedy some will act on it. If the goal is 2%-4% inflation, getting a deflation of -4% might be a little worse than a positive inflation of 10%, but not by much. They both miss the goal by 6%. And getting out of deflation is easier-just print money. To get out of inflation you have to stop printing money.
thanks
I experienced hyperinflation back in 95 in E.Africa..loaf of bread the size of a croissant was $1.50 and a 10 hour wage was same..wheel barrel s of currency pushed from market to market... A coke was 10 USD..
Excellent video!
I've always been amazed that people don't consider the risks of deflation. Even our recent inflationary crisis, I kept thinking: supply will catch up and it will balance. But most people just see the spike in prices and they panic. Thanks for the explanatory video, Peter!
So Peter, are you claiming that government over printing of fiat money has NOTHING to do with inflation?
It would have to continue at likewise inflating rates to keep that upward spiral. Like he said, it's naturally self-correcting.
@@doujinflipaint high interest rates reducing "print" amount in circulation though? that is the point often....
It would be self correcting in a market that isn't false amd overly manipulated by the government. Look at subsidies for Insurance and education. Those prices continue to rise because the government is funding and subsidizing that price point through Obamacare and student loans.
If printing money was the main cause of inflation then we would have seen massive inflation during the Bush and Obama and Trump years with interest rates at practically 0%. Inflation only kicked into high gear once covid started due to supply chain disruption. Before covid, the economy was booming since we were sacrificing resiliency for supply chain efficiency. But we paid the price for that eventually.
Today, demand is high for everything and will remain so, as millennials still want to live their lives regardless of if they are starting families or not. The only way to fix this current inflation is to figure out who's going to supply our stuff, now that it's been established that China is not a reliable supplier.
That was the point of the CHIPS act and the Inflation reduction act: to bring manufacturing back to North America and our actual allies. It will take some years still to build out that manufacturing unfortunately.
I hope we learned our lesson to never outsource our supply chains again just for the sake of higher profits.
Replying to my own comment to point out, in fact, that the fed was having trouble keeping inflation above the target 2% even with all the money printing! (Before covid of course). The economy is way more complicated than you think.
Deflation was not the cause of the "Great Depression", but an effect of it. The dollar was very strong, but few people had many dollars to spend. There is nothing inherently wrong with having a strong dollar, indeed, it can be desirable. One could argue that some of the possible causes of deflation are economically unhealthy, such as a contraction in the money supply, but even this does have to lead to a reduction in consumer demand or productivity. By comparison, inflation is the opposite of deflation and can be very destructive if it is artificially induced by government printing presses, as happened in Germany in the 1920s and still happens today in Zimbabwe here trillion dollar notes are common.
Peter’s one weak spot is Economics. When he talks money, I’m shaking my head so violently I risk getting dizzy. 😂😂
But offering no specifics or retort on what’s inaccurate?
@@esquiredan2702 Answer: everything Peter says is inaccurate regarding inflation and deflation.
If this counts as a "weak spot", Peter's (lack of) understanding of Quantum Computing was a black hole. : )
As a boomer with parents who lived through market crashes, depression, world War and high interest rates, their best advice was no revolving credit card balance, low overall debt and cash reserves for 6 months living expenses. Probably 12 months for current times ( my own update). Be self sufficient as best as you can.
Wrong. Deflation is self regulating. Eventually the "job creators" all get replaced for their poor performance and better people take over. Only amateur economists believe the economy is not self correcting at any given point. In fact Deflation ensures a much better "correction" than inflation ever does. At least with deflation we will eventually get new management.
1:05 Inflation comes from printing money, Peter. Price fluctuations because of supply and demand issues are not inflation.
1:55 You are partially correct about market self-regulation of supply and demand, but the money supply inflation is due solely to government mismanagement.
Thank you again!
No prob dude
As a Libertarian, I shudder to suggest this, but price bottoms? Sort of like the US government used to do with cheese? Reagen eventually started to give away cheese.
Yum, gubmint cheese. I remember my roommate bringing home a 5-lb block of that gubmint cheese. It was fabulous. You can't buy "american cheese" that has been cave aged for a decade or more, but the feds were literally giving it away to poor people!
@markpukey8 This is why we need prices bottoms, so that the "absolute(ly) poor" myself included can benefit from the free food!
So sad that it's Friday and I have to wait 2 days for the next one 😭
I believe the next one will be Peter explaining why he is worried about inflation.
I have to disagree with Peter here. Mild deflation (prices getting slightly cheaper) doesn't cause recession, it's the economys natural reaction to recession. We had periods of deflation before the great depression, most of the industrial revolution in fact, and those were during periods of growth.
Also inflation is not self regulating. Maybe in cases where prices are high in specific industries because of supply/demand imbalance, sure that can level out over time. However, monetary inflation is permanent. We will never see prices as low as they were 10, 20, 50 years ago.
The deflation Boogeyman is nothing to fear. In a healthy economy prices are supposed to come down slightly over time as we incorporate new technology and develop more efficient ways of producing things.
Inflation hurts consumers, savers, and wage earners. The only people who benefit from inflation are debtors, and asset owners, and especially those who use debt leverage to buy assets. Basically governments, and the 1%ers.
Tell me how the average person has benefited from the persistent rise in the cost of living over the years? Intentionally pursuing an inflationary policy has made a lot of people very rich, sure. But most of us who can't surf that wave just drown in it.
Sounds great to me! I'll take milk at under $5 a gallon.
Thanks!
As I understand, the Keynsian economic extended the depression un-necessarily. Government intervention in economies always hurt the economy.
Oh, yes, the perfect universe of always, nevers and idealism. Where women ride unicorns in communistic bliss and love, caring, sharing and altruism fix everything and the men all drive super charged hellcats, never having to slow down for weakling pussies because unregulated competition eliminates faults, creating the perfect machine.
Enjoy your free market, dream world, bubble fantasy that never did, never can and never should exist just like unicorn land never should or will.
Even NASCAR requires restrictor plates because "free" markets tend to kill the participants and spectators alike.
The US was coming out of the Great Depression by 1937. FDR tried to balance the budget (and did) in 1937 and the economy contracted with reduced money coming into the economy. He abandoned that policy in 1938 and the economy picked up again.
The war and the GI Bill and the Interstate highway act that followed put even more government spending into the economy.
The reality is thst large government funded public work projects have amazing long term economic benefits for the economy. We should have continued doing them.
We needed deflation two years ago, but that was politically untenable. The type of inflation we experienced was a permanent (without deflation) structural change to the economy, affecting the quality of goods and services people can afford. No wages do not keep pace, they are “sticky”, the wage data has been skewed by executive orders affecting federal employee and Contractor wages. The DOL is now inflating those wages more often, which also increases the federal debt substantially. While the Republican Party is dying, it was the party of long term concerns and the Democrats are the party of satiating immediate feelings and “candy now”. But the reliance on ‘Government’ in this economy will not bode well ‘long term’. The area I live in is largely held up, economically, by Government installations which is true in many areas of the US.
Deflation is needed. It helps the poor and young household who have little to no assets.
1870-1896: the greatest increase in human prosperity ever. 2% increase in wages and a 16% deflation over that time.
Deflation is excellent. And AI is going to do this big time.
1923-1929: American government lent money to Europe to buy American goods causing over supply when the Europeans couldn’t borrow anymore b/c they ran out of money. The deflation after was because of the fraud involved in that money laundering. Thus it wasn’t representative of historical deflation.
That was because of skyrocketing outputting, not plumetting demand.
@@dixonhill1108 Yes. But the point is that the deflation was excellent for the economy and the average citizen. Inflation benefits those closest to the central bank and harms you incrementally more the further away from it you are as the value of that money decreases. Deflation does the opposite which is excellent for the average person and unconnected businesses.
I totally agree. Inflation is like cholesterol, there is good and bad. On the other hand, inflation ( exclusively a monetary phenomenon ) is like glucose, it seems to taste good, but it slowly destroys you by encouraging debt.
The problem is whether the government and elites/ parasites will want people not working and contributing to their wealth. If a cow stops producing milk for a long time, does the farmer let it live ?
While I agree with the general premise, I think his argument ignores that much of the inflation we are experiencing is in inelastic goods, where the demand won't change much i.e transportation, housing and food. In this the only thing that makes sense is to use industrial policy to make more. If you don't tackle the supply side issues you run the risk of entering a wage price spiral because people will literally need to be paid more to account for it.
Peter is dead wrong on inflation. Inflation is not risijg prices, it is an increase in the money supply. The denominator increasing on the value of moneyx making money worth less.
Yes and no. That's one way for inflation. It is supply and demand. Not only of the currency but of the goods. There was deflation in the great depression from an abundance of goods, but no one had money to buy it. The dollar was ok then, still attached to gold. They over printed money to fix it in 30, causing inflation, but deflation still occurred because the abundance of goods unable to be sold. Warehouses filled with stuff that can't be moved.
@@michaelryan8995 Sorry man but your wrong. Inflation has nothing to do with prices. prices are an easy way to SEE inflation but thats it. Inflation happens when the supply of money increases faster then the growth of the economy. Inflation has to occur to some extent, we cant all trade one dollar back and forth so as value is created, currency has to be created to reflect the increase in value. if the market grows more than the money supply than you have deflation. Your money is more valuable. Inflation happens when the total amount of currency exceeds growth. Your money is less valuable, there is more of it vs the same ratio of market value. prices can still go up or down in both cases due to alot of factors including supply and demand.
@@michaelryan8995 You keep using that word, "Inflation." But, I do not think you know what it means. Prices rising or falling is supply and demand, not inflation or deflation.
In the Great Depression, FDR was constantly increasing the money supply. He kept inventing new government programs which disturbed the economy. He outlawed US citizens from possessing Gold coins in 1933. He called the gold coins in from the banks and melted them.
What got the US into the depression was that England had a Pound clearance problem. World War one was very expensive, so naturally, the price of the pound would drop. The Bank of England wanted to prop the Pound up.
They found a willing ally in Benjamin Strong, chairman of the New York Federal Reserve Bank. He purchased British Pounds with newly printed US Dollars. That lead to the US having a Real estate Bubble in 1925 and a Stock market Bubble in 1929. FDR campaigned as a Conservative, but he governed as a Keynesian and a Socialist. An anti-American Elitist snob.
Good job!
Inflation sucks for borrowers. Deflation sucks for workers. The question is who do you want to injure more? The people who are providing all of the capital that fuels the debt of the federal government. Or, the people who are providing the spending that keeps the economy going?
I had only a few semesters of economics, but I think that inflation benefits the borrowers as the amount of money you owe is worth less over time. Consider owing 10000 of whatever currency your country uses in 80's vs owing the same amount now.
What sucks for borrowers is when central banks raise interest rates trying to combat the inflation.
You mean inflation stinks for lenders?
Inflation is good for borrowers if they're borrowing at a fixed rate, and most are
DEflation is bad for borrowers. If you take out a 10k loan and have to pay back say, 2k in interest over a deflationary period, you're having to pay back a lot more in purchasing power than if you borrowed in an inflationary period.
In an inflationary period, that 12k you had to pay back will buy fewer products/services when it's due back compared to the same 12k when you initially took out the loan.
Deflation is not always a bad thing. Improvements in productivity can deflate prices. For example, look at the price of flat screen TV's. The price keeps dropping compared to when they first hit the market.
Also, we must differentiate between price deflation and monetary deflation. Price deflation is a lowering of the sticker prices. Monetary deflation is a reduction in money supply in the economy, but that can be countered by a corresponding increase in the velocity of money. However, what usually happens is the velocity of money slows, which compounds the deflationary spiral.
Sad to see Peter propagating the myth of deflation causing people to wait with spending. That's just a theory being held over the market as a threat. Also, inflation being "better" only works if said inflation is limited and localized. What we've been through and are still in, is the "everything, everywhere" inflation, with the most worrying: energy, food and housing. The three basic elements everybody needs and simply have no choice but to cough up. And that will have profound effects on everything that is not energy, food and housing. I.e. expect those things to start deflating rapidly as demand goes to zero. And you don't need to be an economist to predict what that will do to an economy. So I kinda agree, that inflation is "bad", but it's both inevitable and probably needed.
Zeihan and bustamante are two sides of the same disinformation coin, where bustamante gives you good information with a bad prescription, zeihan moulds the data in such a way that his solution would be great, if that's how the world really was
Deflation causing people to wait on spending is NOT a myth but it is only a factor, not a main result. Most effects in our complex world are due to a mix of factors. Only the terminally blind or politically motivated will ascribe ANY significant change to a single factor.
Inflation is fraud, When fraud is found out there are always ramifications. People are bankrupted and Impoverished. The people who did the fraud go to jail.
The traditional name for deflation is a "Banking Panic." Bank Runs occur, because people want to take out their money. Most people don't know that the money you place in a checking account will be loaned out for ten years or more.
Businesses lack sales because people are afraid. To stimulate sales, they must lower their prices. Then, they must lower wages to keep from going out of business. Wages and prices ratchet down. In the past, a normal banking panic would take a year to unwind. People tend to buy only necessities when prices and wages are falling. They economize. They downsize. They sell unneeded assets to keep afloat. No one has credit. The banks can't make loans.
In an inflationary era, wages lag behind prices. In a deflationary era, prices are falling faster than wages do. Eventually the bad loans and unprofitable projects are washed out of the economy. The banks which profited the most during the inflation, shutter their doors.
The traditional response by government was to lower taxes, drop unpopular projects and to lay off workers. That all changed when FDR came in. He did the opposite. It was called the Great Depression, because it lasted 10 years. Every time the economy started to recover, some new government program would kick in. In 1935, it was Social Security and AAA. In 1937, it was some other program. As Ringo Starr said, "Everything the government touches turns to crap!"
Thank you.
I'd like too see your views of China sending their products to Mexico then trucked into the US to avoid US import bands.
Trump has said he will not let that happen and in my opinion Biden will not either
That isn’t actually happening.
@@d-man6509if it is bad for the American people then Biden will allow it. He will probably call people who don't support it racist some similar insult.
Germany went from one dependency to another concerning energy supply. Now that Russia has been cut off ( wait for it ) we harvest our gas supplies via Turkey, Netherlands and Saudi which turned out to be Russian gas after all, but now to much higher prices or the USA which became even more expensive than ever before. 😂
money supply - print and you add inflation to your economy