With the different market post’s I got to thinking about deflation, and was wondering about your guy’s thoughts on it if it was managed the way inflation is, let’s say the FED tries to maintain the rate of deflation at 2 percent to prevent a major crash, do you think it can be done? With the correct regulation I think it’s possible to do, do I believe times get tough yes I do, I’m beginning to wonder if economically it might be the best thing once people gets passed the fear thought deflation means the world is ending.

The FED won't allow deflation

I’m wondering more on a theoretical bases if you think it’ll work.

That would make your payments on mortgages cost more each year instead of less. the number stays the same but the percentage of your income comes down each year.......jk

I am far from the most economically literate on this site, but my personal opinion is I do not see how this could work in the long run. Also baffled how you think deflation could prevent a crash.... it would be more likely to cause one, imo.

Let's try to break it apart a little. First, how many people do you know with no debt? No mortgage, no car payment, no student loans, no credit card balances? Now, how many corporations do you suppose have no debt?

So, how would the Fed bring about and maintain deflation? They would need to do one (or more likely a combination) of the following: Hike rates bigly, reduce the money supply a lot, or reduce the credit it issues to borrowers.

So what happens then? Companies are bringing in less revenue, but their debt burdens do not decrease. This will lead to layoffs and wage decreases. Average workers will be bringing in less money, and while products will be cheaper, their debt payments will not. Unemployment will rise. The GDP will decrease.

The economy would stagnate. Why would a corporation proceed with a planned expansion when they know it will be 2% cheaper to do so next year, or 10% cheaper if they put it off 5 years. The same on the consumer side. Why buy a house or a new truck now, if it would be cheaper to do so in a couple years? And even if they did want to expand/buy now, would they be able to? Credit would be restricted, and therefore more difficult to obtain, and more expensive when you can obtain it. Add to that any previously existing debt, which has also became more expensive.

Then there is trade. Imports would increase as a stronger dollar would allow consumers to spend more on cheaper imports. But, since other countries' currency would be worth less against the dollar, they would try to source as much as possible from countries other than us. This would result in a huge hit to US manufacturing, further compounding the issue, leading to yet more layoffs and further wage cuts.

Inflation is caused, in part, by strong growth. Deflation is caused, in part, by strong retraction. The dilemma the Fed faces with their dual mandate of managing inflation and unemployment, is if they raise rates / reduce the money supply / contract credit too much, it will impede growth and bring about higher unemployment which could lead to a recession. And that is just when they are trying to rein in inflation... to bring about deflation they would have to be much more severe, and imo, it would likely result in recession.

Now, theoretically, could your idea ever work? MAYBE. But not the way the country is currently structured. Both companies and individuals are wayyyy too leveraged for it to be plausible. If both groups had more free cash and less debt... it would be a different discussion all together. But that is not the reality of this country and has not really ever been.

Now, all that said....... I don't think we are anywhere near recession now. And I don't even think a mild recession would necessarily be all bad. Company valuations, IMO, are unsustainable at current levels, and I think tightening the money supply and/or modestly raising rates is the path the Fed should be taking going forward.

Anyways.... that's my 2 cents worth, lol.

U.S would never be able to afford it's debt, I don't see how this could work.

Well credit is a rather new idea. And the fed was not even a thing until 1913 and well tariffs funded government until then so…..and the first progressive crap weasel president Woodrow Wilson was in charge coincidence probably not. But I do think it’s stupid that instant information contributes to instant swings in the Dow… but I am just an agronomist field scout…

First I meant the FED manage the deflation rate to prevent a crash like they do with inflation to prevent high inflation, first I would think money reduction would be the biggest factor also interest rate would be used to maintain the rate, as far as debt that’s the biggest challenge but not an impossible challenge that’s one reason for FED control is to watch and to keep things moving, with borrowing money right now it’s very tough in this part of the country, with this it would face companies and people to confront debt they have, that’s the reason I think economically I think it makes sense, but this is why it’s theoretical thinking. These are some of thoughts I have when drinking and fun to talk about.

This is where you lose me. In order to manage the "deflation" rate to prevent a crash...... assuming deflation is already occurring and you're wanting to the Fed to manage it to stop it from deflating more??? The Fed would need to do the opposite of what you're proposing. Which is what they've historically done in the few deflationary periods we've experienced. They would need to slash rates, loosen the money supply, and expand credit.

My first reply was in response to taking it as you were wanting the Fed to go from where we are now all the way down to 2% inflation and then hold it there.

But if you're talking about deflation that is already occurring (which has not happened on any meaningful scale since the global financial crisis) and the Fed trying to prevent it from getting worse....then loosening monetary policy is what would need to be done.... not tightening it.

Deflation it can damage the economy. It is when we go in the negative direction of 0%. Yes Feds want to keep inflation ~2%. To curve deflation they lower interest rates, adjusting reserve policies, buying assets, and guiding expectations to keep inflation near their 2% target.

Deflation is when services and goods drop in price and that is bad for the business and companies. When the market crashed over a century ago Feds didn't interact to help keep things on an even keel. These days of economy they intervein which really helps for irreversible events.

A bear market is when the stock market looses 20% a recession is when down minus for two quarters in a row. I disagree at this time to raise rates and think different about that then you. Increasing rates doesn't create higher inflation. It can though. Higher rates changes our economy in many ways and not all bad though.

I had to look it up but inflation is 2.4% as of today. CPI update is Scheduled for April 10, 2026 it will us our inflation number for March. So, I thought is was just under 3% but 2.4% is very ideal inflation for a balance of our economy and where the Feds like it to be.

Yote,,, You’ld be doing yourself a huge favor by reading up on Austrian economics,,, Mises, Hayek, Rothbard, s
Saifadean ammous and defenders of deflation like Philipp Bagus.

You’ve totally fallen into the Keynesian trap,,,

One of the notable deflation events of the USA was after the Great Depression. No one had anything couldn't afford to buy anything and product when sold were low price. Then that is a problem those business can't make it and close. That is bad ingredient for a vigor economy. You never want to have inflation go to 0 and even worse negative percentage.

What did you look up to get that 2.4% rate snowy? The February core PCE was 3.0% with headline PCE @ 2.8%....... oh never mind you were looking at CPI. Heck, you even said that and here I spent 10 minutes looking it up LOL. The PCE is the Fed's preferred measure.

How do you feel that increasing rates can create higher inflation?

I have read a lot of that. I am referring to how the Fed operates today. I know it is not ideal. I also know almost no one has the stomach for what would need to happen......

Just googled inflation as of today. Chatgtp has the same answer. Yep CPI.

You don’t think people could stomach things getting cheaper? Less government? Actually getting paid a decent interest rate on savings?

I could go on and on and on

New CPI number tomorrow. I think it will go up.

Do you think the government is going to reduce spending? Do you think the millions on welfare and medicaid, the farmers and businesses getting subsidies........would be okay with losing those handouts? Do you think we will go back to a gold standard or some other form of a full reserve banking system?

Believe me, I am a fan of Austrian economics, but I think anyone who thinks we will see anything like that in our lifetimes is just dreaming......... Unless of course an entire collapse of the economy occurs, in which case it could be possible.

Today, as we speak,,,

What ever you think of the what’s happening in Iran

Iran isn’t asking for payment in USD or yuan or gold

It’s happening right now,,,

"Payment must be in Chinese yuan (via Kunlun Bank / CIPS) or digital assets."

Just a way to avoid the dollar or euro.

I like this ,all ears here in Mt .Was almost ready to get in my root cellar and close the doors .

Get rid of all money.
Go all in on the barter system,then peoples worth will be measured on how useful their skills are.
Useless people=worthless.

If the cost of goods decreases, everybody waits until some future date to buy stuff because it will be cheaper.
Spending stops and economies collapse.

Stagflation is the Keynesian boogie man

People generally buy phones/computers/technology/ etc today, knowing they’ll be cheaper( and better technology) in a year from now

They don’t wait forever,,

Japan suffered on-and-off deflation over a period of 25 years. The nickname for this period is the Lost Decades.



Deflation is not good for economic growth. People are disincentivized to spend money so demand for goods falls.

The Japan story was caused by the BOJ super loose credit boom in the 80’s

They increased the money supply way to much

Which is what central banks do

I’d be more worried about stagflation than deflation now. Slowing economy and rising inflation. Signs of that have been simmering. The Fed doesn’t have the tools to fix stagflation. .
Jim

Ironically or proof we’re being monitored,,,,,lol
This article showed up on my newsfeed this morning


The Man Who Predicted Every Central Bank Disaster


Article 5/27 - Ludwig von Mises and the theory of money they buried for a hundred years
Vienna. March 1938.
The Gestapo enter Ludwig von Mises's apartment the day German forces march into Austria.
They take his library. They take his manuscripts. They take twenty-five years of private correspondence and research notes accumulated across a lifetime of work. For decades, everyone assumed it was destroyed. It turned out the papers had been seized, shipped east, and buried deep in the Soviet archives in Moscow — where they sat until an American economist and his wife found them half a century later.
Mises himself had seen it coming. He left Austria for Geneva in 1934, four years before the Anschluss, carrying what he could. He spent six years in Switzerland finishing the manuscript that would become his masterwork. Then France fell, Switzerland was surrounded by Axis territory, and he and his wife Margit fled again — through France, across Spain and Portugal, and onto a ship to America.
He arrived in New York in 1940 with a Rockefeller Foundation grant and no academic position. He was effectively barred from a paid university post for the rest of his working life — not because he lacked credentials, but because his ideas made the right people uncomfortable. He taught as a visiting professor at New York University, unpaid, from 1945 until he was 87 years old. His seminar ran on donations from businessmen who understood what the academic establishment refused to acknowledge.
In that seminar room, working without institutional support in a country whose economic mainstream had just decided Keynes had all the answers, Mises produced Human Action — the most ambitious work in the history of economic thought. He wrote it in English, his third language, at age 67.
His brilliance was without precedent. His vindication came too late for anyone in power to be embarrassed by it. Here is what he built, beginning in 1912, that central bankers have spent a hundred years trying to ignore.
The Book That Arrived Thirty Years Too Early
The Theory of Money and Credit was published in Vienna in 1912. Mises was thirty-one years old.
The book accomplished something his colleagues at the time considered impossible: it integrated monetary theory — the study of money, credit, and prices — with the Austrian framework of subjective value and marginal utility. Before Mises, monetary theory and price theory existed as separate disciplines. After him, they were one system.
But the most consequential part of the book wasn't the integration. It was what Mises discovered when he followed the logic of credit expansion all the way through.
Banks lend money they don't have. This is the foundational fact of modern banking — fractional reserve lending, where a bank holds a fraction of deposits and lends the rest into existence. When a central bank cuts interest rates, it makes this expansion cheaper and easier. More credit flows into the economy. Interest rates drop below what the genuine pool of savings would support. Entrepreneurs borrow and invest in projects that look profitable at the new artificial rate.
But the savings aren't real. The resources those projects require — the labour, the materials, the capital goods — are already being used elsewhere. The boom is a fight over resources that don't exist in sufficient quantity to satisfy all the competing claims being made on them. When credit tightens, when rates rise, when reality asserts itself, the projects collapse. The malinvestment is liquidated. You get a recession — not as a failure of the market, but as the market's correction of a lie that the central bank told about the availability of real resources.
Mises called this the theory of the trade cycle. He published it in 1912. The Great Depression arrived seventeen years later.
The Boom Nobody Was Supposed to Notice
Throughout the 1920s, America ran on cheap credit. The Federal Reserve, created in 1913, kept rates low through the middle of the decade. Capital flooded into long-term projects — real estate, equities, industrial expansion. The economy boomed. Everyone called it the New Era. The experts said business cycles were a thing of the past.
British pedophile John Maynard Keynes was among the true believers. He was heavily invested in commodities and stocks throughout the late 1920s, convinced the prosperity was structural and permanent. He had a name for his investment strategy — "credit cycling" — and the confidence of a man who believed he understood the system better than the market did. By the time the crash arrived in October 1929, Keynes had lost close to 80% of his personal net worth. He had to consider selling his art collection to stay solvent.
Mises, meanwhile, had turned down a senior position at a major Vienna bank shortly before the crash. He told his future wife Margit that a great collapse was coming and he didn't want his name attached to it.
Both Mises and his student Hayek — who had published his own business cycle work in 1929 and was among the very economists the Nobel committee later credited with warning of the crash before it happened — argued the same position: the Depression was not a mysterious catastrophe. It was the inevitable correction of the credit expansion of the previous decade. The solution was to allow liquidation of the malinvestment and let prices adjust. More credit would only delay the reckoning and make it worse.
Keynes, having lost a fortune betting on the boom, pivoted. He published the General Theory in 1936, and it told governments exactly what they wanted to hear — that the solution to a crisis caused by spending was more spending, that deficits were stimulus, that experts with the right models could manage economies back to health. Governments adopted it instantly. Keynes won the policy battle, and for the next several decades, the Austrian framework was sidelined — periodically vindicated by events, consistently ignored by the people running monetary policy.
Image
What Mises Got Right That Nobody Wanted to Hear
Money is not neutral. Every increase in the money supply redistributes wealth before prices adjust — from those who receive the new money last to those who receive it first. This is the Cantillon effect, and Mises built it into the foundation of his monetary theory. Central bank inflation is not a technical adjustment to the money supply. It is a transfer mechanism that benefits governments, banks, and asset holders at the expense of wage earners and savers. The people who hold assets when the money is created win. Everyone else pays through rising prices.
Credit expansion doesn't create prosperity. It borrows it from the future. The boom feels real — investment is up, employment is up, asset prices are up. The resources being consumed, however, are not being replaced. When the expansion ends, the investments that were only viable at artificial interest rates get liquidated. The prosperity was real; so is the bill.
You cannot inflate your way out of a recession caused by inflation. This is the trap every central bank has fallen into since 1913. The recession is the correction. More credit expansion delays the correction and makes the eventual reckoning worse. Mises wrote this explicitly in 1912. Every subsequent attempt to print away a downturn has confirmed it. The 2008 response created the conditions for the 2020 instability. The 2020 response created the inflation of 2021–2024. The mechanism doesn't change. Neither does the outcome.
Image
What It Cost Him to Be Right
Mises spent his career watching his predictions come true and his advice get ignored. He watched Austrian inflation in the early 1920s — which he partly slowed as economic adviser to the government — give way to the European banking crises of the 1930s. He watched the Great Depression get blamed on free markets rather than on the credit expansion that caused it. He watched British pedophile John Maynard Keynes become the most influential economist of the century on the strength of a theory that told governments to do more of what had already failed.
He didn't become bitter about the ideas. He became bitter about the profession. The last section of The Theory of Money and Credit, added to the American edition in the 1940s, has a different quality from the calm first edition — sharper, more combative, less patient. You can feel the weight of thirty years of being ignored by people who should have known better.
He kept working. He kept the seminar going. He taught Murray Rothbard, Israel Kirzner, and a generation of economists who would carry the tradition forward. He died in New York City in 1973, aged ninety-two, as the stagflation of the 1970s — which Keynesian theory said was impossible and Austrian theory had predicted was inevitable — was just getting started.
He had been right about everything. Nobody in power ever apologised.
But The Theory of Money and Credit was only the beginning. Mises had already been thinking about a far larger problem — one that would prove even more consequential than his theory of the business cycle. In 1920, he would publish a paper that mathematically proved the Soviet Union was doomed before it had properly begun. That argument — the socialist calculation problem — is the subject of Article 6.
"Credit expansion is the governments' foremost tool in their struggle against the market economy." — Ludwig von Mises
Next: Article 6 — Why Socialism Cannot Work. Ever. Mathematically. In 1920, Mises publishes a paper proving that rational economic planning without market prices is logically impossible — not difficult, not suboptimal, impossible. The Soviet Union spends the next seventy years trying to prove him wrong

So, get out of debt. Keep a few groceries on hand. Buy metal? Meanwhile keep on living traditionally?

Pass go and collect $200. The go to for all ills is war. It cures inflation and even the great depression ! Then all is well until the biggest boom of all and that being the "baby boom".


I like Danny's idea best.

Like the hatter buyers waiting until the end of the sale to get their beaver?

https://en.wikipedia.org/wiki/Steve_Keen

No one has a crystal ball. What he suggests is a possibility. In the last depression people with lien debt/mortgages suffered the most. People who could raise a garden, keep a few chickens, earn money because of a job skill got by. Share croppers, unskilled factory workers, skills with little demand, had it real bad. Banks likely won't close but if uncle sugar has to print trillions because of FDIC that money won't buy much. No sense in being chicken little either. Good idea IMO to do everything you can so that if it does happen your not sleeping under a bridge.

This.
The only hope they have to paydown the debt is through inflation.

The economy isn't broken, It's working exactly as designed

Just not for you or me

They call it monetary policy, but we should call it what it is: legalized theft


You can drop humans anywhere with property rights and voluntary exchange, and they'll build prosperity from nothing

Drop them under central planning, and they'll starve surrounded by abundance


Sorry for the ranting,,,,, I get fired up this time of year

Tax time sucks!

Japan could not print inflation. Sometimes the printing just reduces the level of deflation

I know you live in CAN and I am talking about the U.S. but you seem to be up on our system as well so......

Our current M2 money supply is ~ 23 trillion. Our physical money supply, including both money in circulation and uncirculated money held by the Fed is ~ 5-6 trillion. So, how would we get from where we are to where we would have to be.......in your opinion?

Pretty sure you already know my answer,,,,,, sound money and a free market

Let the cookies crumble without intervention

Using the above Japan example: the BOJ created the problem in the 80’s. And then the further interventions cost them the “lost decades”

Instead of just taking the hit,,, and letting the market recover naturally

It would of been way faster and less painful in the long run

Thomas Sowell has a great quote when asked about what should replace the fed?

“When someone removes a cancer, what do you replace it with?”

All central banks, and central bankers are a cancer

Canada is currently being run by probably the worst ever created

But it is a world wide problem

Well, ok. But that is what I meant when I said most people could not stomach it.......

Inflation numbers released today for March are not good, FYI.

It's all oil.... core CPI was flat.... and actually came in under expectations.

It’s not that they can’t or won’t stomach it

It’s that most people are economically illiterate and don’t understand what’s going on

And that’s by design

Also why just the basic understanding of economic theory is far more important than what somebody’s latest investment newsletter or what buffet and Ramsey are saying

Everyone talks their book

"Economics recommends neither inflationary nor deflationary policy. It does not urge the governments to tamper with the market’s choice of a medium of exchange. It establishes only the following truths:

By committing itself to an inflationary or deflationary policy a government does not promote the public welfare, the commonweal, or the interests of the whole nation. It merely favors one or several groups of the population at the expense of other groups.

It is impossible to know in advance which group will be favored by a definite inflationary or deflationary measure and to what extent. These effects depend on the whole complex of the market data involved. They also depend largely on the speed of the inflationary or deflationary movements and may be completely reversed with the progress of these movements.

At any rate, a monetary expansion results in misinvestment of capital and overconsumption. It leaves the nation as a whole poorer, not richer. These problems are dealt with in Chapter 20.

Continued inflation must finally end in the crack-up boom, the complete breakdown of the currency system.

Deflationary policy is costly for the treasury and unpopular with the masses. But inflationary policy is a boon for the treasury and very popular with the ignorant. Practically, the danger of deflation is but slight and the danger of inflation tremendous.

Ludwig von Mises"

The FED doesn't care if we pay down the debt. The debt will never again be paid "down"

Deflation is good for a saver. Not so good for a borrower and an economy based on consumerism

OK. Still not good.

What goes up must come down.
Nothing can keep growing forever.NOTHING.

I believe economic growth in a market economy trends upwards in the long run because of scientific advancement and innovation. Of course there will be periods of market corrections in the short run.

You will have much better luck teaching a coyote to play fetch than you will reasoning with Boco. It is a complete effort in futility.

Since the other post has vanished......

From Barron's today....

Let me guess,,,, you had to do an AI search to confirm what I was talking about?

And then the ol’ copy/paste

It is easy to throw names out and claim economists say things. You were already inaccurate on the Iran, yuan thing. Be nice to know what actually is being said by these economist.

Economists have economic theories, that don't always play out in the real world. Japan doing all that money creating should have caused massive inflation by theory and yet........

The Japan 80’s print created the asset bubble, which led to the deflation

The yuan thing,,.,. Well I got 2 of the 3 right

Yote, yes I’m talking maintaining 2 percent deflation, just like they do know with inflation, after some thinking on your first post the imported products could be controlled through tariffs, also the idea of manufacturing not growing most would build if they’re making money, now I do believe the tax code would probably need to be changed namely the depreciation rate to help match deflation. I’m still on page one and I’m going to keep reading so if something is different in the next pages I’ll get there.

I just read Boco’s post on worthless people and I do like it.

I never saw a response to high inflation and high interest rates, my mined goes to the 1980’s.

With some more thought with the value of the dollar increasing it would be harder to export, this is something I can’t think of a solution.

That was Stagflation. Theoretically this was supposed to be impossible.

It wasn’t good I still remember 20 percent getting paid for operating loans.