To: Road Walker who wrote (148506 ) 2/7/2015 8:53:56 AM From: RetiredNow Read Replies (1) | Respond to What's insane is financial repression. We're experiencing deflation precisely because of the endless monetary stimulus. What QE and ZIRP does it that it destroys savings. Savings are essential for capital formation. So capital is becoming scarce, which means research and development suffers and new businesses are not created and business investment in general falls off a cliff. Companies then prefer to give investors a return OF capital, instead of a return ON capital. Then companies borrow more to accelerate the return OF capital. Revenues begin to stagnate, like we're already seeing. Wages for the 99% decline, like we've seen since 2008, while only the 1% benefit, since they are the asset holders that benefit from financial repression which squeezes yields and drives stock prices up. And since the 99% are the primary engine of Consumption, they start to spend their savings accounts to keep up consumption habits that they can no longer afford due to stagnating wages. Why not? Their savings accounts are not earning any interest, because the Fed has stolen their money by artificially keeping rates low. When the savings are gone, they start to borrow more to keep up their lifestyle. Eventually, they can no longer afford to borrow more. So they stop spending as much. To entice them to continue buying, companies lower prices. Demand continues to fall through the floor and commodities follow suit. Prices decline almost across the board.
