Wednesday, August 11, 2010


I'm a big fan of moderation in all things.  Lately we've been getting a little moderation on the weather front and are loving that.  There's a big difference between 95F (35C) and 105F (40+C).  In the wider scheme of things I'm also a fan of moderation in a lot of ways.  Investing is certainly a place where I believe you will be more successful if you are moderately invested in different areas - of course that's usually called being diversified.  Wine, women (or men) and song are also places where moderation is beneficial; at least in my experience.  If your experience has been different, I'd love to hear about it!

I've been reading a lot about are we having inflation or deflation or will we have one of them and when.  Another place where moderation is a good thing.  Inflation is easy for me to understand but deflation is tougher.  My problem with the entire question is that the truth, whatever it is, will be obscured by the fact that the U.S. government has been fooling with the Consumer Price Index (CPI)  for so many years that I don't think it tells us a thing.  For me that's a big problem; if your own government is lying to you, you're screwed.  Governments lie, of course; they are made up of people and people certainly lie.  It's the pervasiveness of the lying that bothers me.  I gave up on the CPI many years ago when they took gasoline out of it because "it was too volatile".   Well, most of us have to buy it so I really don't give a damn if it fouls up your statistics.  It is extremely important to us consumers and it's cost should be reflected in the CPI. 

To get back to the inflation-deflation question:  a lot of us remember when we had some pretty severe inflation in the 1979-1980 time frame.  I remember hearing of a Certificate of Deposit that paid 14% interest!  Today Wells Fargo will keep your money for 49 months and pay you less than 2%.  Deflation is much tougher for me to comprehend; I had to look it up here in wikinvest.   Of course if things become cheaper that means that there will be less tax income (sales tax & property tax anyway); and businesses will have a tough time remaining solvent so maybe that is what's happening.  I know this house that we just bought in 2009 has lost almost 20% of it's value and our property tax bill has dropped by approximately the same amount.  We have seen several of the small businesses in the area fold but, of course, many do even in the best of times.  However, having just used 300 gallons of diesel in our travels, I can categorically state that not EVERYTHING is in a deflationary state. 

Our society has so many constraints on the economy that I don't know that 'pure' inflation or deflation is possible.  The federal government has such an influence:  employees; military; retirees; Social Security; Medicare (and whatever Congress just voted in).  It's quite a list and those people aren't going to get a reduction in their payments.  Then there are the large companies who have unionized workers; it's possible to change those contracts but it would certainly be slow and difficult!  Anyway, I'm definitely confused.

Maybe it's time to just go have a beer!  Have a good one.

1 comment:

JoeinVegas said...

Lack of moderation in W&W don't seem to have bothered Hugh Hefner much. Don't know if he sings.

Payments are going down for doctors; one of the changes in Medicare was the reduction in payments for them, which is why more and more do not accept new Medicare patients. Seems like government pay in general is going up. (Look at Clark County firemen)