Originally Posted by beforeobamabans
See, because this generation has never experienced deflation, they don't know what it is or what to do about it. All the fed printing would result in inflation if the slack in demand and employment ever disappears but it won't.
Remember that Bernacke's PHD is in the depression and deflation. He knows what he is doing--fighting tooth and nail, using everything including the kitchen sink to keep the deflationary spiral at bay--and he's failing. Demand will never return to early 21st C. levels because of massive personal debt (which has doubled since 2000) and the inevitable tidal wave of baby boomer retirements, proceeding at 10,000 per day. BB'ers are grossly over indebted and under capitalized for retirement with an average of $40,000 in savings. Do you think they are going to be spending at the same pace as when they were working? No way!
You can already see major deflation right in front of you. What's happened to the housing market? What's happened to employment and wages.
You make some good points. I honestly never thought of the slack in demand. You are certainly right that retirees, for the most part, will not be spending as they were in their earlier years. Taxes are going to go up for everyone.
Obama can't get all he needs from just the rich - he needs to broaden his revenue base and get into the middle class, which, as you rightly point out, have shrinking wages. Taken together, with the rising number of unemployed, I agree that demand will go down.
And that after this is accomplished, and the brave new world begins
When all men are paid for existing and no man must pay for his sins,
As surely as Water will wet us, as surely as Fire will burn,
The Gods of the Copybook Headings with terror and slaughter return!
- Rudyard Kipling, 1919