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Deflation by Arnie Sherr
+Darrell Zahorsky (about.com) speaks of Deflation+. The big "D" word is creeping into the vocabulary of economists and market watchers. Small business owners have never experienced a deflationary period unless they are of the retirement age. Most business people are unfamiliar with the "D" word. In times of uncertainty, be aware of possible economic outcomes and how they impact your business. - I've been reading great deals of how inflation is rearing its ugliness globally. Moreover, we in America have not been immune to a past of stagnant income standards. Consumer prices increase while salaries remain still, changing credit criteria which I support is a major cause of what has become the deterioration of *"America's great Income to Cost of Goods and Services Ratio." * - From my research there seems to be little comparison statistically (official studies) between the natural inflation of good and services and a maintained healthy ratio with regards to income standards. While over the years the CPI 1 has increased and incomes having not kept pace, adjustments were made to the nation's credit criteria; mortgage payment to salary ratio was years ago - mortgage payment =1/4th of monthly salary / over past years it had adjusted to ½ - automobile financing enabled a new criteria aptly named sub-prime financing well before this designation reached the mortgage lending industry. Moreover, the real culprit of the present economic dilemma is not the mortgage crisis; its sub-prime lending, predatory practices, and the like; but an over-time deterioration of the ratio between the CPI and national income standards; corporate America's premeditated design to achieve their two main objectives, growth and profits. Furthermore, their success at keeping salaries from rising in relationship to the growth of the CPI was not enough so they took to outsourcing to countries in which foreign workers earned much less than those available in America. In the meantime, inflation persisted and salaries remained stagnant right up and until the present. God bless our elected Washington DC cashocrats for their almost unanimous support of Free Trade. This was like adding kerosene to an already raging fire as it further fueled the greed that has driven us to where we are economically. - Predatory lending and the like; well they too are the fault of growing atmospheres of greed and profiteering deliberately implemented at the expense of the American people. Furthermore, it is my assertion that none of this is accidental and was and is held as top secret by every of America's elected officials all the way up to the top; the Oval Office. It was and is the ultimate of capitalist 2 agenda; to promote and expand wealth among the wealthy and hold back and restrict economic growth among those not of wealth. It is the ultimate separation of societal difference, economically. It is almost third-world-like if it is understood that most countries have no middle income class; only the rich and the poor. Like ours, the agenda is to keep the lower class low and the upper shall prosper and grow. - What of Deflation 3? Because unemployment is increasing by staggering numbers, housing values are dropping with significance, stock markets are vacillating as though a heart in defibrillation, banks resisting normal lending practices, credit criteria raised upwards of normality while good credit is being lessened by the deliberate removal of available credit, insecure oil and gasoline prices, and more America's buying power is thwarted because Americans are insecure of their financial futures. Adding to that forecloses, auto repossessions, and an astounding number of bankruptcies retailers are predicted to start dumping goods and services earlier than ever and for greater sacrifices of profits than ever before. - Instead of what should have been the concurrent growth of incomes along with normal inflationary growth of goods and services the reverse is begging to take root; deflation. A permanently lessening demand for what have become "over-priced" goods and services causing a permanent roll-back in mark-up, or what I call a *NATURAL ADJUSTMENT *4 back to economic reality; a proper ratio between the CPI and consumer income standards. However, to achieve a healthy adjustment careful attention to its direction is essential. My fear is that they who have created this anomaly may be all we have to repair what were their deliberate acts against America's economic virtues. - To summarize: Rather than incomes having followed a normal ratio against the CPI, it is now time for the CPI to adjust downward to the held-back levels of American income standards. Let us all pray those in charge act with prudence and diligence towards and ideal balance of economic stability. - 1 Consumer Price Index - CPI... The CPI is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. The CPI is calculated by taking price changes for each item in the predetermined basket of goods and averaging them; the goods are weighted according to their importance. Changes in CPI are used to assess price changes associated with the cost of living. - 2 "Capitalism" is conventionally defined along economic terms such as the following: An economic system in which the means of production and distribution are privately or corporately owned and development is proportionate to the accumulation and reinvestment of profits gained in a free market. 3 Deflation is a broad decline in prices. Deflation occurs when the prevailing demand cannot absorb the supply of goods. Companies attempt to stimulate demand by cutting prices, which in turn may lead to cost-cutting wage reductions. The reduction in purchasing power further reduces demand. During periods of deflation cash is often considered 'king' as goods and services are losing value. - 4. Economic tendencies are toward adjustment, but not necessarily any ideal adjustment. Social welfare depends on human motives and on institutions. This was recognized in eighteenth-century philosophy of the moral "Law of Nature" (jus Naturae), accepted by Physiocrats and Adam Smith
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