Mish Reverts to Ass-Hattery

Recently I gave Mish credit for being right about deflation.

Now I have to pull the rug back out, because he is wrong - about deflation.

Check this out:

. . . unthinking economic parrots talking about the "economic damages of deflation" have no idea what they are even saying.

He goes on . . .

Series of Questions

• If your refrigerator conks out, will you buy a new one or wait 6 months to take advantage of lower prices?
• If the transmission on your car fails will you wait 6 months to get it fixed?
• If your pantry is bare, will you wait 1 month to buy food even if you expect food prices to drop?
• If you need a new winter coat, will you wait and if so, how long?

. . . totally oblivious - in a way that can only be willful - that these are outstanding examples of non-discretionary spending.  What you will put off is kitchen remodeling, buying a new car, restaurant meals, a new winter coat while the old one is still functional - not to mention a big screen TV, game system, or vacation.

Amazingly, it gets worse:

Ask anyone on fixed income if falling prices are a bad thing. Ask students or those on minimum wage if falling prices are a bad thing.

Think you will have many takers? From either group?

Well, since people living on fixed incomes are often relying for their cash flow on the interest from their life-time of meager savings, vanishing rates of return near the 0-interest bound might just be a bit painful, since many of their costs are fixed or, like medical care, continue to increase. And since prices are sticky (Who told us that? Oh, yeah - - - KEYNES!) the presumed benefits of falling prices have yet to do anyone a lot of good. As if that could ever happen, since since those students and minimum wage workers will be losing their grants and shitty, low-paying jobs sooner and faster than any fall in prices. Evidently Mish has forgotten the realities of deflation that I praised him for highlighting, just only five days ago, and believes that there can be some sort of benevolent deflation.

The only people who say falling prices are unwelcome are the bankers, the stock brokers, government and economic parrots who misguidedly trumpet economic claptrap from the bankers, the stock brokers, government, all of whom benefit from inflation because of rising taxes and/or because they have first access to money.

In effect, parrots serve as pawns for the wealthy, for central bankers, and for government officials who wants a bigger piece of your paycheck via rising sales taxes, rising property taxes, and rising income taxes.

In reality, inflation is theft from the middle and lower classes for the benefit of government, the wealthy, and also public union workers who have inflation adjusted benefits written into many of their contracts.

This isn't exactly backwards, but it's about 150 degrees off course.  Inflation allows the middle class, and, in fact, all debtors, to amortize their debts without being consumed by usury (in other words, real interest rates are low.).  It also encourages more growth in the economy, which means more and better jobs and generally higher wages.  The reason the lower classes can't benefit from inflation, per se, is that they have severely limited access to credit.   Deflation hurts the poor and middle class the worst, and bestows relative benefits on owners of capital, since money is increasing in value, and real interest rates are high.

Once again, Mish shows his total tone-deafness to irony with statements like this:

I wish economic writers had the ability to think rather than parrot ideas espoused by Keynesian clowns.

His thinking is totally constrained by the contra-realistic clap-trap of libertarian clowns.
.