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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Gib Bogle who wrote (104722)8/30/2009 4:36:09 AM
From: Elroy Jetson1 Recommendation  Read Replies (1) of 110194
 
Some have suggested we might experience a deflation of the things you have and an inflation of the things you need, but clearly from past experience this is wrong. It is a deflation of the things you have AND the things you need. Your personal welfare is determined by whether your income deflates less than prices or far more than prices.

Personally, we have seen the value of our assets rise somewhat as we were in cash during the decline, and have seen our income decline somewhat as interest rates have plunged. So, as with many during the Great Depression, the combination of the change in asset values and income were a mixed bag. We'll buy nearly everything at lower prices but we've also trimmed our spending.

We decided for us this would mean we now usually eat at home compared with before when we ate virtually all meals at fairly nice restaurants. Now we're actually eating better, but we're paying a not inconsequential price with our labor. This has reduced our annual spending by about $30k annually. From a numbers standpoint it's like paying ourselves about $45 an hour, made better by the fact that it's tax-free and a creative hobby.

In any event, it's one example of $30k annually removed from the GDP. The restoration of this amount of GDP depends on our level of confidence in the future and our actual current income.

It also highlights the fact that deflation could possibly be better for us than it is for waiters and restaurant owners.
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