what deflation means to you

I'm talking about retail deflation. This occurs when prices start falling, generally in a troubled marketplace, like today.

So you may have noticed that gasoline prices are roughly half of what they were nearly 1 year ago. "Black Friday" sales are happening two weeks before the Thanksgiving holiday. You can get a laptop computer from Wal-Mart for $300, among other things. Retail prices are falling all over the place. Deflation? Yes. Why? Lower demand due to lower consumer spending. People are waking up. They're spending less. This can be a good thing because it keeps manufacturers in line. It also allows you to save more. But deflation, if taken too its extreme, causes a lot of damage.

For one thing, deflation means that companies are in trouble. They have to lower their prices, and therefore their profit margins, to stay afloat. They take incredible losses during this time. The illusion is that the consumer thinks all is fine and dandy and that his/her money goes farther. It does go farther, until you lose your job because your company can't sell anything. Retail deflation can be just as harmful as widespread inflation. The difference, however, is that deflation tends to correct itself quicker than inflation.

What is curious to me in all of this is the idea that the bailout package does just that - it will flood the market with nearly $1 trillion of new money, which will adversely affect the money supply and drive up inflation. Will that stabilize the economy as it was intended to do? I don't think so. For one, the credit industry is just a sliver of the economic problems faced in the country right now. Shoring up the balance sheets of a few select firms was just a ploy to keep the Boys' Club on Wall Street intact. It can't fight deflation and shrinking credit markets. It's not enough money. What will cure the current lending "crisis?"

The market will correct itself if left to chart its own course. Commercial banks will fill the vacuum left by the investment banks. If those large banks had failed, other instutions in good liquidity situations would have stepped up, acquired their assets at a fair price, and lending would continue. Instead, we are rewarding poor asset management with taxpayer dollars. Lesson learned? No.

All in all, deflation is something to worry about. It might seem nice at the gas pump or while holiday shopping, but keep in mind that retail deflation's lag will probably spread backward and upward - through suppliers, distributors, and outward to creditors and the like. Deflation means cut backs. It means lower wages and salaries. It means layoffs. But the market always finds equilibrium if left alone. We just have to convince our politicians that they can trust the market to chart the best course for us, or convince them that the government has no place rigging the economy whatsoever (fat chance!).

Enjoy your Thanksgiving Holiday.

how smart is barack obama?

The answer: extremely smart. Why? Because he beat the Clintons at their own game. 'Nuff said.

Happy Guy Fawkes Night!

Remember, remember the Fifth of November,
The Gunpowder Treason and Plot,
I can think of no reason
Why the Gunpowder Treason
Should ever be forgot.

Guy Fawkes, Guy Fawkes, t'was his intent
To blow up the King and Parli'ment.
Three-score barrels of powder below
To prove old England's overthrow;
By God's providence he was catch'd
With a dark lantern and burning match.

Holloa boys, holloa boys, let the bells ring.
Holloa boys, holloa boys, God save the King!

Officially, the Gunpowder Plot was intended to be an assassination of the King of England/Scotland, James I. The attempt by Guy Fawkes and other Catholic radicals was foiled, and since then, Guy Fawkes Night is celebrated in commemoration of the kingdom. Apparently, until 1859, Guy Fawkes Night was celebrated throughout the British empire by fiat. How nice.

I didn't even know about the holiday until I saw V for Vendetta, one of my favorite films. Since then, I suppose I view the holiday through V's lenses - as an attempt to quell an illicit and over-arching government. His government, set in the future in England, had over-extended its surveillance powers, controlled the people through fear and lies, and essentially became a (pharmaceutical) corporatocracy. Fascism, for all its negative connotation, is applicable to the government of V's time. One key ingredient of fascism is its attempts to quell any opposition among its constituents through violence, propaganda, or other intrusive means. That was the England of V's day. Perhaps the Wachowski brothers, who produced the film, used V and his revolution as a commentary on today's governments, specifically the US. I don't know for sure, but to me, there are a lot of similarities.

That's not to say that America is totally fascist - far from it. But during the Bush years, there were certain actions taken by his administration that, if abused to their full extent, would resemble it. President Bush felt he was not subject to the rule of law, just like Nixon. With that philosophy (possibly fed to him through the likes of John Yoo), he felt he could extend FISA powers (the power to spy on others) without court order. He instituted the Military Commissions Act, which stripped captives or "enemy combatents" of their right to a writ of habeus corpus. (Incidentally, "enemy combatents" was only vaguely defined by the administration). He went to fight two wars without authorization from Congress. These abuses and many others could have paved the way for a government much like V's. It scares me somewhat.

So no, I didn't vote yesterday. I want change. REAL change. The types of changes that Barack Obama or John McCain could or would introduce are miniscule. The status quo will remain such. The beltway will continue to be the beltway. Taxes will remain outrageous. The environment will continue to decay. Civil liberties will always be teetering on the edge of the cliff. I don't vote. That's just putting my stamp of approval on a broken system that does nothing to give its constituents liberty. The type of change I want is not the Barack Obama kind, and certainly not the John McCain kind. It's the V for Vendetta kind.

In the film, V uttered one of my favorite lines: "The people should not fear the government, the government should fear the people."

Happy Guy Fawkes Night!