Deflationary Cycle

Reader comment on: Fiscal Policy's Unintended Economic Consequences

Submitted by Joe Holly (United States), Feb 15, 2011 17:36

Hey Gang,

We are in the midst of a deflationary cycle according to Eric Schmidt, Google CEO and he anticipates it lasting another 4-6 years. In the portions he discussed on Fareed Zakaria GPS he sounded in accord with Harry Dent Jrs' books and lectures, (Americas top generational economist). I heard Harry Dent speak at the Pacific Coast Building Conference (largest in western US) in 2001. He predicted the onset of a generational downturn in 2008, too few genXers to fill in behind the boomers with a slow decline until 2020 when the echo boom takes over. All the big players K&B Homes, DR Horton, etc where in the front row hanging on his every remark. Msr Dent felt that our downturn would not be as bad as Japans becomes every survey of boomers indicated they wanted to keep working and spending, not retire in lockstep with their cohort. Unfortunately we had a so called Black Swan event where two not so good things happened at once. Generational downturn plus a banking crisis equals boomers scared shitless (technical term) and not willing to spend.

The question now is how are we to act... A great deal needs to be deleveraged, the AIG credit default swaps should have been paid at 75 cents on the dollar or less to relect reality. Frankly as Ms hunt says everything needs to come down. In the great depression residential real estate went down by half but commercial went down by 80%. Those who made it on the way up are going to lose some on the way down and the sooner the better so we can all get back to reality and making a living for everyone. Whatever the Fed tries to do will be like a fire hose into a tidal wave and those who know this to be true need to start dealing honestly with it..

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