Doyle Saylor djsaylor at
Tue Sep 15 08:52:24 PDT 1998

Hello everyone,

John K. Taber asked: "Well, I guess I'll ask again. Won't somebody take pity on an ignoramus, and explain to me what deflation is and why everybody is worried about it?"

Doyle I am not economist, I just play one in tv commercials. Assets like real estate, commodities like oil go down in price because of over production and other pricing mechanisms (like over building) which can not be worked out of the system any other way force the system whether country, or global exchange to lower the prices to sell. That general lowering of prices to make things once again profitable is a deflation. With an economic slowdown it becomes a depression. Recessions are an example of inflations of prices while business activity goes down.

Doyle Recessions are considered worker friendlier compared to depressions by liberal thinkers. Business downturns are all bad for workers because unemployment is used as the main means to make prices come back into profitable balance. In other words, by unemployment, labor costs are lowered, and thus making the profits rise on sold goods. But Depressions are swell for those who have bonds and recessions are bad for those who hold bonds because bond interest rates don't rise with the inflation. Whereas in a depression as prices go through the floor interest rates provide lots of old high money while everyone else can't seem to find a dime. So as a hedge in a depression there are traditional instruments like bonds (or gold though not seemingly this time) which the rich use to protect their wealth. Depressions tend to be deeper and nastier than recessions.

Doyle Much more could be said in a technical sense. For instance what is the mechanism which causes profit to rise and fall. Etc. So anyone else with enough technical know-how to reply?

regards, Doyle Saylor

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