Wednesday, May 4, 2011


See Goldman's May 3rd and his May 4th posts on Inner Workings.

David Goldman is rather doggedly holding to his deflationary line. It is true that trillions of dollars disappeared in 2008 in the collapse of multiples. It is true that housing continues to deflate, or at least not inflate. It is true that banks are not anxious to make loans, and, more importantly, consumers are not interested in taking on debt, for the most part.

The reality is that food and fuel prices are rising dramatically and causing other costs to rise. The rise in fuel is a function of a deliberately weakened dollar -- with some speculation. Commodities have inflated because they are a hedge against inflation. No one is really making much money on them, and some slippage in gold and silver prices has occurred in the last couple of days.

The rise in prices for basic necessities -- food and transportation -- does have a deflationary vector to it. It puts pressure on people to spend less on non-essentials. The fear of inflation causes people who have cash to save more of it. Money is not being multiplied except in commodities.

Personally, I'm praying for deflation. Governments need to face the reality of "living within their means". Obviously, it is not politically popular or expedient to tell the truth. We can do our part by supporting those political leaders who show honesty and courage in dealing with the deficit realistically. CLUE: Giving away more money, making ridiculous promises, shredding the Constitution, and trying to shift the problem off to someone else two or four years down the road is not being honest and courageous.

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