'Few understand the deflationary impacts of the entire gamut of trends that is playing out..' - Mike Shedlock
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'Few understand the deflationary impacts of the entire gamut of trends that is playing out..' - Mike Shedlock

Posted by ProjectC 
'Few understand the deflationary impacts of the entire gamut of trends that is playing out, or the stress these trends place on families.

It is futile to fight changing social trends, but that has not stopped the Fed with reckless proposals on top of reckless proposals. Please see Inflation Targeting Proposal an Exercise in Blazing Stupidity; Fed Fools Itself for more details.

As I stated in June of 2008, we are now on the back side of peak consumption and Peak Credit. Regardless of what Bernanke of the Fed does, the demographic pendulum is in motion. There is no going back.'

- Mike "Mish" Shedlock, Reluctant Breadwinners, Downsized Housing; Demographic Pendulum in Motion, October 17, 2010


'After 20+ years of deflation fighting tactics, Japan has nothing to show for its deflation fighting efforts but massive public debt.'

“A new common sense appears, in which consumers see it as irrational or even foolish to buy or borrow,” said Kazuhisa Takemura, a professor at Waseda University in Tokyo who has studied the psychology of deflation.

“We’re not Japan,” said Robert E. Hall, a professor of economics at Stanford. “In America, the bet is still that we will somehow find ways to get people spending and investing again.”

Robert Hall, like most others, does not understand the deflationary impacts of the entire gamut of changing socioeconomic trends and attitudes.

After 20+ years of deflation fighting tactics, Japan has nothing to show for its deflation fighting efforts but massive public debt.

To be sure, one can point out that US demographics are more favorable than Japan's. However, US consumers have a much bigger and much more deflationary pile of leveraged debt on their balance sheets than do most Japanese families.

...

As I stated in June of 2008, we are now on the back side of peak consumption and Peak Credit.

Regardless of what Bernanke of the Fed does, the demographic pendulum is in motion. There is no going back. Once attitudes hit extreme then reverse, there is nothing the Fed or anyone else can do about it.

Thus, the question is not whether the US will follow the footsteps of Japan, the question is whether the US or Japan blows up first from misguided central banks fighting a battle that cannot be won.

- Mike "Mish" Shedlock, Bitter Feud at ECB over Monetary Policy; BOE to Expand Stimulus; Japan's Great Deflation; Will the US Follow? October 18, 2010