Paul Krugman says US heading into deflationary dive-so really Paul, are you going to switch cat food to less expensive one from Thailand?

 

Comment by Terry/Tavivoot 

My best friend, Stuart, tells me that he is a “Break all Target Salesman” here in Thailand, but that his company is squeezing him to sign a new contract that gives the company the ability to fire him with 1 month notice. As a result, his future income is at risk-and he has pulled back his spending because of the uncertainty.

Stuart’s situation is similar to most business people globally-and it implies a wider Macro level implication. To survive companies are rationalizing their human resource stack, but in trying to survive, it zaps strenght from the economy it depends on-resulting in the need of government to keep spending money it doesn’t have and difficult to finance.

The result is a deflationary dive. 

For the US, it means a weakening dollar and so higher import price. For Thailand, it means cheaper foreign imports, tougher exports and fewer tourist.

 What that situation means and how it impacts the Thai Central Bank’s interest rate policy is to be seen-

-especially with a massive government borrowing pending and at the same time, blasting away 24 hours a day at how Thai consumers should not spend money-

-ie stick it in the bank for the government to borrow and spend-ie so government can win votes-ie screw business people-ie business people screw their people.

And so even the best like Stuart get screwed.

 

 

Paul Krugman says the US is heading for Jap-style Deflationary Dive

The following is a follow-up to Paul Krugman’s blog at the New York Times-by a blogger in the US

Surely, the various signs are clear. We have unemployment payments outpacing job losses and wages falling faster than payrolls. Given, for example the bank closures and mergers amongst other things, what is happening is we are losing higher paid jobs, older people in middle management, white collar jobs that have remained relatively protected through the previous downturns. There are so few manufacturing jobs left, now it’s the guys in the suits. Getting this sort of person back into employment is going to be very difficult.

This brings huge damage to tax receipts, both income and sales taxes, which is supposed to be the source of revenue for debt payments. How is the government ever going to bring the budget under control, other than monetization. We may be seeing deflation of certain assets, but the fall in the Dollar is going to raise the prices for anything that comes from overseas…