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WASHINGTON (AP) -- It might seem like prices are rising wherever you look, from medical care to college tuition. Yet to the Federal Reserve, they might not be going up fast enough.
The Fed says a little more inflation might be just the thing to start a chain reaction that would ultimately create jobs -- and avoid a spiral of falling prices that could damage the economy.
Once deflation takes hold, it can wreck an economy. Workers suffer pay cuts. Corporate profits shrivel. Stock values fall. People, businesses and the government find it costlier to pare debt. Foreclosures and bankruptcies rise.
And people spend less, convinced that prices will fall even further if they just wait. That trend has already emerged in the housing market. Many would-be buyers are standing on the sidelines, waiting for home prices to fall further.
Spending by shoppers accounts for about 70 percent of economic activity in the United States. A further drop in their spending could potentially throw the economy back into recession.
Originally posted by dr_strangecraft
Watch this not work. Again.
Originally posted by saltheart foamfollower
reply to post by dr_strangecraft
The banks and capital firms are sitting on tons of money. They are making income above inflation. Why spend?
If they attempt to inflate out of this, we will be Waimar. They will not be able to control it once it gets going.
I have no faith in them at all.
Deflation does not really hurt the economy. It can actually help.
Originally posted by Rockpuck
We need jobs, we need a reason to hire, we need something to produce that actually generates wealth..
American economy has undergone a fundamental shift since the conclusion of World War II, at which time service industries accounted for 10% of nonfarm employment, compared with 38% for manufacturing. Since the 1970s the American economy has moved away from producing goods to providing services, and the service-producing sector has accounted for an increasing proportion of workers. In 1970, for example, there were 48.8 million service-providing workers, and 22.2 million people in the goods-producing sector, representing a service-to-goods ratio of 2.2 to one. (See Table 2.2.) By 2000, the number of workers in the service-providing sector was 107.1 million, compared with 24.6 million in the goods-producing sector, representing a service-to-goods ratio of 4.4 to one. In 2005, according to preliminary statistics compiled by the Bureau of Labor Statistics and published in Establishment Data Historical Employment (2005), workers who provided services (111.5 million) outnumbered workers who produced goods (22.1 million) by a ratio of five to one.
Originally posted by xyankee
If they want to make a difference in the job market, why don’t they make all the US company’s overseas, come back and hire US workers. Don’t tell me that they can’t do it, all they need to do is tax and embargo them to the point that it will not be worth it to do business overseas. Yank any company officers citizen ship if they don’t comply. The influx of jobs will change the economy.
I want to offer up one caveat though, are the same definitions of inflation/deflation properly applied to the masses as they are applied in the business game?
One thing I want to mention, Where does all this money, property, and assets go?