Unthinking Economic Parrots and Deflation Fighting Madness

The ineptitude of Japan's policies hoping to combat deflation is staggering. Worse yet, unthinking economic parrots talking about the "economic damages of deflation" have no idea what they are even saying.

Please consider Japan passes new $61bn stimulus package

Japan's parliament has passed a stimulus package worth about $61bn (£39bn), designed to kick-start the country's fragile economic recovery. The stimulus was designed to create jobs, Prime Minister Nato Kan said, through measures to help small businesses and boost consumer spending.

Earlier, figures showed that Japanese consumer prices fell for the 20th month in a row in October.

The vote in favour of the latest stimulus measures represents a victory for the government, which has struggled to get the package through parliament. The move is in marked contrast to European governments' policies, which are focusing on cutting spending to secure growth.

Japan has been struggling with weak growth, a high yen and deflation.

The core consumer price index fell by 0.6% in October compared with a year earlier, official figures showed. This was a slight improvement on the 1.1% price falls seen in September.

Deflation is particularly damaging to economic growth as consumers delay purchases until prices fall further.

Idiotic Premise

I stopped quoting the article on the frequently repeated premise "Deflation is particularly damaging to economic growth as consumers delay purchases until prices fall further."

I wish economic writers had the ability to think rather than parrot ideas espoused by Keynesian clowns.

Series of Questions

• If your refrigerator conks out, will you buy a new one or wait 6 months to take advantage of lower prices?
• If the transmission on your car fails will you wait 6 months to get it fixed?
• If your pantry is bare, will you wait 1 month to buy food even if you expect food prices to drop?
• If you need a new winter coat, will you wait and if so, how long?
  

The answer to that last question is "Perhaps for a bit, but you will not wait 3 years even if you expect prices will be even lower 3 years from now."

Short of assets like stocks, bonds, and housing (and except for periods of hyperinflation) it is tough to cite any examples where inflation expectations mean a damn thing.

Unthinking Economic Parrots

Yet week in and week out, articles like the above parrot misguided ideas about inflation expectations. Worse yet, they spew forth nonsense that falling ideas are a bad thing.

Ask anyone on fixed income if falling prices are a bad thing. Ask students or those on minimum wage if falling prices are a bad thing.

Think you will have many takers? From either group?

The only people who say falling prices are unwelcome are the bankers, the stock brokers, government and economic parrots who misguidedly trumpet economic claptrap from the bankers, the stock brokers, government, all of whom benefit from inflation because of rising taxes and/or because they have first access to money.

In effect, parrots serve as pawns for the wealthy, for central bankers, and for government officials who wants a bigger piece of your paycheck via rising sales taxes, rising property taxes, and rising income taxes.

In reality, inflation is theft from the middle and lower classes for the benefit of government, the wealthy, and also public union workers who have inflation adjusted benefits written into many of their contracts.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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