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Warning: Deflationary Collapse Dead Ahead

Posted: Wed Sep 16, 2009 1:50 pm
by annarborgator

Warning: Deflationary Collapse Dead Ahead

Posted: Wed Sep 16, 2009 2:01 pm
by annarborgator
Amazing allegory from Steve Keen's DebtWatch blog that very aptly describe our economic situation:
You have just come from your annual medical checkup, where your doctor assures you that you are in robust health.

Walking jauntily down the street, you bump into a practitioner of alternative medicine. He takes one look at you and declares “You have a serious tumour! It must be removed or you will die”.

You ignore him as you always have, and continue your merry way down the street. One day later, a stabbing pain suddenly cripples you, and you collapse to the pavement.

In agony, your call your doctor, who initially refuses to send an ambulance because he knows you are well.

When you lapse into a coma and stop talking mid-sentence, your doctor concludes that perhaps something is wrong, and sends an ambulance to take you to hospital.

Initially the doctor waits for you to revive spontaneously, because he still knows there’s nothing really wrong with you. But as your pulse starts to weaken, he reluctantly calls a retired doctor who had experience of a similar inexplicable malady in the distant past.

She prescribes massive doses of tranquilisers, painkillers, vitamins, and oxygen—all substances that had been removed from the medical panoply due to recent advances in medical theory. Reluctantly, your doctor follows his retired colleague’s advice—and miraculously, you start to revive.

After a year of expensive medical treatment, you return to the same robust health you displayed before your inexplicable illness. Triumphant, if somewhat puzzled, your doctor declares you well once more, and releases you from intensive care.

As you stride confidently away from the hospital, you have the misfortune to once again bump into the practitioner of alternative medicine.

“But they haven’t removed the tumour!”, he declares.
http://www.debtdeflation.com/blogs/2009/09/15/it%E2%80%99s-hard-being-a-bear-part-four-good-economic-theory/

Click the link to see the full explanation and conclusions drawn from the allegory.

Warning: Deflationary Collapse Dead Ahead

Posted: Wed Sep 16, 2009 4:14 pm
by MinGator
But...but....but...I thought the Fed just said we were coming out of the recession?

Warning: Deflationary Collapse Dead Ahead

Posted: Wed Sep 16, 2009 4:54 pm
by annarborgator
LOL.

In reality they're probably technically right...3Q GDP will probably print positive with all the stimulative printed money flowing around everywhere. The problem is that they've also added further instability to an already precarious economic situation.