Since y2k (at the very least), the Fed has pursued a policy of artificially low interest rates. The result has been overinvestment in capital goods.

Factories are idle because the expected revenue stream anticipated by their owners (who were tricked into thinking there was a greater pool of savings than actually existed) never materialized.

These are not “productive” factories; they are mute testimony to capital misallocation brought on by loose monetary policy.

The problem is not actually the economy (which is only a metaphor for the voluntary exchange of goods and services). The banking cartel, as represented by the Federal Reserve and its member banks, is the problem.

http://www.cnbc.com/id/33996852

i guess we should let them go back to just asking the lender what the appraisal “needs to be” and they can write down that number?

It’s nice to feel appreciated. : )

Like GYSC says …

I don’t see how we can get around deflation. I keep seeing a path that I don’t know how we can escape.

The only way to provide lasting employment for Americans, not “one-time stimulus stuff”, is for companies to make what Americans need. Sadly, we have exported those jobs overseas. To bring jobs home then, we need to be competitive. It’s tough to be competitive when we make $25/hr.+ benefits and the overseas competition makes $45/month.

Hey, I don’t want to make $45/month any more than the next guy, so I hope we can be competitive without matching dollar for dollar. That said, I don’t see how to get the economy back in balance without Americans accepting a huge cut in our standard of living.

We can’t keep borrowing overseas money to buy stuff from overseas. In the long run, it won’t work.

Market Clearing Prices are a fundamental concept that we all learned in Econ 101 (if we took it). It is the price at which buyers and sellers make an efficient market (maximum utilization of resources, but keep in mind “maximum” is not necessarily 100%).

There are 2 serious problems impeding this return to an efficient market.
1. Sticky prices. This concept is fairly well known and understood. It simply takes time for prices to adjust downward (they do so slower than upward)

2. Government intervention. The government has used a myriad of ways to “extend and pretend” in many ways, of which there are too many to list here without hijacking the thread.

As always said “There’s nothing price won’t fix”. Unfortunately, that’s deflation, and noone wants deflation… it’s the boogeyman; and he’s coming to get you.

Did you know that you can make money buying a house in the high desert and leaving it sit, claiming it as your primary residence while renting elsewhere? Yes, it’s true, if I spend 80K on a house and get an 8K stimulus, I can make payments for many years before having to pay the piper. There’s a lot of speculation here. Rampant.

Besides, think there’s no global deflation? Watch this and then answer than question:

http://www.youtube.com/watch?v=0h7V3Twb-Qk

Chuck Ponzi