Wednesday, July 28, 2010

Inflation and deflation in our economy


San Mateo Daily Journal

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Inflation and deflation in our economy
July 27, 2010, 02:37 AM Letter


In the great economic depression of the late ’20s and ’30s, people had no economic guarantees on wages. The auto business was one of the first places where people cut their spending, because it’s a luxury to buy a new car.

It was a vicious cycle, a downward spiral that just couldn’t stop, and industry kept cutting prices to where people could afford to still buy. This was the deflation. Inflation at home mostly hurts the rich, but it mostly helps the poor, except for those who are on set incomes, like pensions. That’s why the rich are trying to bring about deflation. The very rich, however, profit from the deflation, because their dollars grow in value even though they’re doing nothing with them.

We’re on a crash course to bankruptcy again, but the government thinks it’s going to patch it all up instead of curing the disease: Which is that they’re hanging onto their riches instead of putting them into circulation. In the past, deflation and depression have frequently led to a vicious circle of nationalism, xenophobia, the disintegration of states and even war which is happening today.

Ted Rudow III,MA

Menlo Park

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