Fighting deflation globally ain’t easy

By J Saft
November 21, 2008

James Saft Great Debate – James Saft is a Reuters columnist. The opinions expressed are his own –

With the U.S., Japan and Britain — nearly 40 percent of the global economy — facing the threat of deflation, it’s going to be just too easy for one, two or all three of them to get the policy response horribly wrong.

The global economy is so connected, and our experience with similar situations so limited that the scope for error is huge.

Think of it as having three pilots flying a jet plane, one each operating a wing and the third managing the tail.

Oh yeah, and they all work for different airlines.

Though there will be much talk of international coordination in the next year, and though the central banks and governments of the world will likely be rowing in the same direction, their ability to gauge the effects of monetary policy and government spending on their own economies will be pretty limited, and even more so on the whole.

Failure when fighting a global recession, a global balance sheet adjustment, a global banking recapitalization, debt deflation and very possibly actual deflation can take many forms.

“It’s very hard to calibrate and it’s awfully easy to overshoot or undershoot, both of which would be disastrous,” said Lena Komileva, London-based strategist at Tullett Prebon.

Under clubbing the response to falling prices means you could slip into a self-reinforcing deflation, making your debts, be they consumer, housing or government, heavier and setting up a cycle where businesses and consumers defer consumption and investment.

Over-reacting risks fomenting a new bout of inflation and potentially causing a new bubble. (Who knows what that would be — dirt, water, baseball cards?)

And remember too, when deflation was last an issue on this scale globally during the 1930s, the global economy was nowhere as near as integrated.

As for now, the signs are clear: deflation is a growing threat in much of the world’s economy, though still to be sure not the central forecast.

U.S. producer prices dropped by 2.8 percent in October, the largest decline on record. Core intermediate goods and core crude goods prices, which show inflation at earlier stages in the production cycle, fell by a big 1.7 and a staggering 17 percent, respectively.

Consumer prices, which are usually sticky on the way down, fell at a record rate in October, down one percent and even falling by 0.1 percent in the month when plunging food and energy prices are excluded. That will kill corporate profits and shows a business community racing with consumers to see who can capitulate fastest.

HERE, THERE AND EVERYWHERE

Inflation is falling rapidly in Britain too, with overall consumer price inflation down 0.2 percent in October, the first monthly fall since the annual January sales and the first in October since 2001, just after 9/11.

Japan meanwhile has slipped back into recession, domestic demand is weakening, wages are falling and deflation may develop some time next year, a scenario Barclays Capital rates as a 40 percent chance.

Even China, where inflation has tumbled to 4.0 percent in October from a 12-year peak of 8.7 percent in February, has moved its focus to averting deflation.

Be in no doubt, central banks have the tools to fight deflation; while interest rates can only be cut so much, officials can step up the quantitative easing now happening, they can commit to hold rates at zero for an extended period of time, they can drive down their own currency by purchasing foreign bonds or finally, simply print money and drop it from the famous helicopters.

The issue is not the tools, but the speed of the printing presses or size of the bond purchases needed to get the right result, especially when it is interacting with what will be huge tax cuts and deficit spending.

A mix of monetary and fiscal policy will work, but it’s got to be the right mix and it has to be reasonably well coordinated internationally.

None of this is without risk. Remember the last deflation scare in the U.S. in the early part of this decade, which in retrospect caused the monetary bubble which was nursemaid to the housing bubble.

Print money or borrow excessively and you could lose the confidence of the currency market and experience a run, which certainly will help to fight deflation but is no-one’s idea of good policy.

In theory the amount the state will need to borrow will be in part offset by the amount individuals save, or more to the point pay down in debt and decline to invest privately. That theory will be put to the test by the number of governments who are going to be selling a very large number of bonds, which will after all have to be paid back.

Next year is looking as if it will be as unconventional as it is scary.

– At the time of publication James Saft did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund –


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40 comments

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Whilst we are in un-charted territory due to click of a mouse trading, trying to stop recession is like trying to stop the tide coming in, it is part of the cycle of life, there will always be good and bad times. I feel the governments should be more hands off, wait till we bottom out, THEN re-finance the system. Interest rate drops only widened the margins for the Banks and reduced the spending power of those that have savings, thus withdrawing more money from the high street.

Posted by Quentin Jones | Report as abusive

Monetize it!
Yep, print enough cash and pay off everyone’s debt. I mean all of it. Let every currency every where print enough to pay off all debts worldwide of all its users. (I would say citizens but currency is no longer a national thing)

What are the implications of such a bold move?

Consumer demand would boom, not having any liabilities from all the stuff we have accumulated. The housing crisis would be over since everyone owns their home and all the bondholders were paid off at par, many of us would want another one, somewhere warm for winters. State and local governments would all have clean balance sheets and significant borrowing capacity and there would be lots of cash looking for a home.

No, I don’t see a bad side to this except prices would stop falling and depending how excessive we want to get from here, inflation could run rampant. If you were completely debt free, would you go buy a new car? boat? go on vacation? (I bet the big three would love it)

Call your Congressional delegation and demand they pass the “Monetize It” plan.

It is deflation in a different context than in past years. Nobody would argue that the overall cost of living is high. Prolonged exposure to high living costs has a cumulative effect. Deflation is occuring not from lack of optimism or desire to buy but rather a fundamental inability to pay. Yet despite this hazardous environment you will find municipalities raising taxes.

You will also see a lot of policy initiatives hoping to restore consumer confidence. It is a great way to waste money and for bureaucrats to sit around a table nibbling shrimp – discussing how to cheer people up. People want to spend. The savings rate is zero. People are spending well beyond their means. So policy-makers should wake up and stop waisting time. Kindly fire all the psycho-analysts on staff pretending to be economists.

Posted by Don | Report as abusive

i follow your analysis, mr. saft, and you helped me to save money but i dont know the real value of THIS money. Who killed the good sense of old savers and pushed for an economy of lendandspent will have bad sleep at nite

Posted by poldo | Report as abusive

The deflation if reached would be more a black hole in the
universe(economy).
It can be caped not by simply cheering people up, but by creating a right kind of platform where right kind of oppurtunities to invest can prevail as far as both consumer & government are concerned.

Posted by Gaurav Garg | Report as abusive

The concentration of America’s wealth in the hands of the fewest people since 1929–and we all know what happened after that. Any economist, pundit, politician, or Treasury staffer who doesn’t realize that is the root of the problem needs to be fired so they can contemplate the problem, the one they cannot seem to grasp vicariously, first hand. The Great Depression was caused by the lack of demand not for lack of supply. And yet every single step the government has taken so far is aimed at supply–including the planned automaker bailout that will help the Big Three make more cars no one wants nor can afford to buy.

The wealth is firmly clenched in the hands of those few who are gripping tighter as their fear grows and our government is going deeper into debt giving them even more in bailouts. It started with Reagan. Trickle down Reaganomics never worked, working Americans became two-income households, worked longer and drove further, and borrowed more to maintain the standard of living and create the illusion of prosperity. Over two decades in the making (real wages have been in decline in the US since 1973) this problem is too big to solve quickly. In this last decade this imbalance was masked by an asset bubble in housing created by the most ignorant and foolish Federal Reserve Chairman in US history and presided over by the president with the worst approval record in history. The transfer of wealth accelerated during the last two presidential terms until it was no longer sustainable and crashed under its own weight. But the wealth is now concentrated and locked up and our system has no mechanism to more equitably distribute it. We are in for a prolonged period of suffering and no one seems to have the guts to do what FDR did to turn it around in the 1930s. And even then progress was slow–WW II is what really turned it around. And a major war in the modern nuclear age is unthinkable.

Posted by Daniel | Report as abusive

join the rally to end the federal reserve system at endthefed.us. They are trying to make us all afraid of this because it it bad for them and the fractional reserve monitary polciy. If we had sound money it would be good for us. Read this article to understand both sides.
http://www.virginiainstitute.org/viewpoi nt/deflation.html

“There is all the reason in the world to avoid a demand-side deflation. There is no reason at all, however, to oppose a supply-side deflation. No reason, at least, for ordinary citizens to oppose a supply-side deflation. It may be different for politicians and government officials. They are in a different situation with respect to deflation than are ordinary citizens. Inflation allows for increases in government budgets that would never be possible under deflation. Sustained inflation entered the American economy only with the creation of the Federal Reserve in 1913. Until then, the federal government claimed less than ten percent of the output of the American economy.”

Posted by mike | Report as abusive

“Sustained inflation entered the American economy only with the creation of the Federal Reserve in 1913.”

endthefed.us
Protest TOMORROW (11/22/08) at cities across the U.S.

Posted by mike | Report as abusive

I agree that the fundamental problem is not one of confidence but is one of ability. Consumers always wish they had more to spend and would if they could. The simple matter of fact problem is that they cannot. I have yet to see recognition of this fact in the discussions that are currently focused on industry and finance.

I obviously can only speak for myself on this point, but all I am able to do for the foreseeable future until the cost of living goes down or incomes go up substantially, is pretty much simply work to meet my cost of living needs. It happened over the last year, but the amount of money I had to make some extra purchases vanished to the point now where I dont, wont and cant make any. This holiday season I’m making the majority of my gifts and count myself lucky to have the ability to do so.

It will be interesting to see if anything all of the money and attention focused so far on finance and industries actually comes down to effect the basic economy.

Posted by Eric | Report as abusive

It’s a shame a global organisation such as the UN doesn’t exist in such a way as to oversee a unified effort during these (and other) troubled times. I can’t help feeling the focus on America is to a certain extent a distraction which prevents the rest of the players in the global economy to work their way through the troubles, with the emphasis on “work their way through”.
Sitting around waiting for solutions from the top seems to me to be a bit hopeful. Not that there’s anything wrong with being hopeful, but being busy and making real things which real people will buy will probably be the real solution. Giving money to corporations and/or people to pay off their debts foolishly and voluntarily entered into strikes me as being a bit stupid as it will reward and encourage the behaviour which made the mess we’re in.
Are we still working our way through the turmoil caused by World War One?

Posted by Peter H | Report as abusive

Since none of these money experts, Central Banks, can walk on water their best shot that everybody who is suffering can understand is to make sure their Govts. dont spend more money than they have. Lets get to the moral high ground on this and stop trying to pull a fast one on each others Govt..This is how WARS start and I don’t want my kids to get killed because of the financial cheating and greed. John

Posted by John Dinneny | Report as abusive

Central Banks or none at all:Fiat money or gold backed fixed exchange rate:Regulation or no regulation. The fact of the matter is capitalism moves through bust to boom economic cycles that no human institution has ever successfully avoided for very long. We all have our moment in the sun and so has modern capitalism. Perhaps it is time for human societies to evolve past capitalism and move on to something new. We are running out of time. Farm land is being lost to soil erosion:Fresh water supplies are dwindling:Fisheries are in collapse:The environment is becoming more toxic every day from the effects of industry and human habitation. At the same time our population continues to grow. I think the critics of Thomas Malthus should reconsider their position. Maybe then we can reconsider our positions on practices of material consumption, birth control, education, war and peace.

Posted by Anubis | Report as abusive

All very intellingent comments. But all of these analyses has left out a simple, fundamental truth: the rich get richer, the poor get poorer. So long as humans roam the earth, there will be injustice among humans–its as simple as that. You can analyze this and that, but that simple fact will never change–only what you call it. What would you do if you made $10M a year? Would you give it all to charity? Build a school? Doubt it.

Posted by JP | Report as abusive

There is no room for equality in a wealth based society…
-Plato

Posted by Charles Farley | Report as abusive

Bradley said “monetize it”. A problem is that monetizing kills non-inflationary capital return, i.e. investors are loosing faster than non-investors :). That is not very capitalist decision, however it is most likely to happen. Than many people will completely lose their retirement accounts /which evolutionary is also correct thing/ and will be very unhappy.

Also, the CPI index is quite strange thing to use – whenever disposable income dissapears, haw can you find that by the CPI index? In our case – limited 3000 monthly income, but the expense for mortgage/rent, food and gasoline has jumped from 2000 to 3000. I don’t even count the healthcare costs, which are huge. So, from a consumer point, if no credit is available, the decrease for consumption when your unnavoidabable costs reach maximum of income is actually 100%. That means you don’t have any more money to buy things, and although the official CPI is deflationary, you available basket of goods is effectively limited to neccessities. For the consumer recently, inflation increased 10-20 %. Consumer consumption nominator in the CPI index consists only necesseties at present.

Exactly the same statistics were developed during the Great Depression, data is there, I have done models on this. Other people can do models too….

Posted by Ananke | Report as abusive

Mr Saft offers us a horrible – although thought provoking scenario…. But he himself offers NO SOLUTIONS…..
He must be a Republican. They are always great at scaring people to death, but they never offer any real solutions.

Respectfully,

EdgyInChina

Posted by Jim Edgcomb | Report as abusive

The money supply has been blamed as a factor in deflation as that money supply is reduced. However, other definitions of “deflation”, (wikipedia), refer to dual contributing factors: decrease in money supply, and decrease of credit. To what extent is decrease in availability of credit a contributing factor to deflation? If credit is considered beyond common types to
include leveraged amounts, as per derivatives and other instruments for leverage, (often leveraging
many times over by exotic investment vehicles), could this provide an answer as to why printing dollars has so far not stemmed deflation, and theoretically may not create inflation until the leveraged credit that is no longer available is offset by new dollars?

In the last few months, we heard of transfer of wealth to the Mid East. If the wealth were invested in anything but dollars it dissapeared.?? There is never enough cash to liquidate the market correct? The idea that houses and real estate should automatically increase in value is not necessarly true. A house that is worth less that the mortgage against it in a current time does not mean the owner is going to liquidate it or just walk away. Every car that is sold is worth a bunch less when it goes off the lot. Just because some guy in town says the ranch is worth less does not mean the owners will sell it for that. I think the same is true for bankers in the true sense that loans were originated in the beginning. When loans were started to be made by brokers instead of bankers that all changed. But just because the broker made a loan on inflated property to a buyer that could not afford the loan why should the lender have to value it at zero? I think the market always goes up on dreams and lies and then I hear commentators crying because it is down and won’t go back up until someone lies and someone else dreams. I think that there is no money just hot checks and I am not sure when people are going to stop taking them. The world ecomony now is about like a house crap game at a local bar. The house has taken so many bad checks that they cannot afford to quit taking checks as long as they can get cash for their drinks. However an old man once told me “Son don’t give credit at that crap table, when you beat them and you know you will they won’t come back a play with you and then they won’t drink at your bar.” Some of these wisdoms need to be applied when we approach getting out of this mess.

Jesse

Did I pass?

US dollar should be devalue to resolve the current recession and credit issue. It’s inevitable and sooner better. My two cents.

Posted by Jaipal | Report as abusive

Uhh, the pathetic results of the refusal to accept any other than Machiavellian politics in the past 60 years – and the denial of the inevitable consequences of a $US fiat currency backed by force and the credit bubble created to pay for the wanton expenditure of the military-industrial complexes of the world.

What has happened in the past 20 years policy-wise has guaranteed failure. Just as the Vietnam war and the Korean war were both actually known to the people there as “the American war”, this is the collapse of the American financial order and will be known as the American financial crisis and the American economic disaster.

Posted by FreedomLand | Report as abusive

Young news columnists with their journalism diplomas are always so clever and all-seeing. I can’t imagine why Obama isn’t naming some to his cabinet.

Posted by Ken | Report as abusive

The rich get richer and the poor get poorer except for the poor who get richer and the rich who get poorer.

Posted by PVR | Report as abusive

A little deflation might not be a bad thing. Housing prices have to deflate until they reach historic levels. The median house historically costs about 2x to 3x the median income. That number got up to 4 for the US nationally, and as high as 10 in some markets. That’s the housing bubble, and it has to collapse.

When bubbles collapse, they collapse all the way. Once the decline starts, the prospective value associated with appreciation goes to zero. A house is only worth what you can make renting it. House prices have been way above that level for years. That’s over.

Deflation has other benefits. It encourages saving. Before the crash, we had 5% inflation and 2% yields on CDs, for a real yield of -3%. Now we have -1% inflation and 4% CDs, for a real yield of 5%. Putting money in the bank pays again.

Deflation and tight credit forces companies to hoard their cash and use it intelligently. It discourages M&A activity, which historically benefits management but not stockholders. There’s been too much liquidity sloshing around the financial system.

The argument that deflation causes inflation seems bogus.

To all those that say the American financial system along with the Federal reserve are all to blame for the crisis, you need a serious reality check! If the American free market system is soooo fundamentally unsound, how the hell did America build the biggest and greatest interstate freeway system? Did the New York skyline get built on an unsound economy? Did the world’s biggest and greatest military complex get built by a crap system? The sheer mass of physical infrastructure that America has built in the last 100 years would never have been built if the free market capitalist system was flawed. There will always be the ever-controlling rich as a minority and the ever-helpless poor as a majority. Deal with it. You can either whine your life away, or you can adapt and grow rich. There is always less and less space as you travel to the top of any pyramid. Nobody said this struggle would be easy.

Just because the economy has a really bad year or two doesn’t mean we need to change everything!! If your son or daughter were clinically depressed for more than 2 years, would you get rid of them? The world is not going to end. What we have here is a natural oscillation toward the negativity end of the spectrum. We’ve had a good couple of decades…and now we’ll have the displeasure of being collectively depressed and focused on negative thoughts…but we always oscillate back into the light of progress and positive vibes. The world is not ending…but it may feel like it. Everyone is born with the ability to persevere ANY circumstance, it’s only a matter of will power and self-motivation.

Posted by John Kunick | Report as abusive

Not sure one could call the collapse of a ponzi scheme deflation… the devaluing of “real” goods is , imho , just a short term result of forced liquidations , necessitated by the collapse of worthless paper. It really is just a matter of time before the massive injections of printed fiat gain velocity through the system and lead to inflation … inflation is the only option left to the Fed. for the survival of the US dollar , deflation would cause a US debt default.

Posted by andre lotz | Report as abusive

I realize that this is no an interactive thread, but if someone would respond to a question, I would appreciate it.

It appears that, at least in the US, we have a consumer driven, credit based economy. Is that a fair simplification? If so, what would happen to this economy if everyone decided not to ever use credit cards again and defaulted on their credit card debt? I realize that their “credit ratings” would tank, but wouldn’t this also cause industry to rewrite its business models based upon cash based consumer spending? What impact would this have?

Posted by azdog1 | Report as abusive

Most readers here probably know from history that nations with a strong middle class are known to handle tough national challenges with more likelihood of success. We know too, again from history, that whenever the income-gap between “the rich and the rest” gets too great that country is headed straight toward history’s trash heap–a little matter that Bush and buddies forgot, I believe? Let’s hope policymakers from here on out will study every proposal–every one–as to its effect on that gap. (Hint: Getting back to the Constitution might help.) Why ignore history–why reinvent the wheel?

Posted by June | Report as abusive

The economies in the western world are now in free fall with various governments in panic mode such as the British government which have unveiled their latest strategy to spend its way out of the recession, Its instructed the banks which have been nationalized to get lending back to 2007 levels. The US bail out is just another example that the governments have no option but to keep spending but this cannot continue the west is bankrupt and the future is grim, governments will fall the wealth will be removed from the rich and at present the powerful the outlook is for a break down in law and order.

Posted by SiscolinjamesOBE | Report as abusive

The potential devastation of an economic depression is so great that deflation will be attacked at all costs. Authorities will err on the side of inflation, rather than risk a prolonged period of deflation. The cash dropping helicopters have been scrambled.

Deflation is good. It’s like the jugglers dropped the balls allowing us time to notice the pickpockets. End of story.

Isn’t this the plan? All the world is crying for a unified Global Economic system, including one currency. We may skip nationalism and move straight past that to Globalism. People are misinformed. Having a global economic system is not going to be better. Maybe in the short term people will feel as though they are all contributing to some Utopian good, but in the end, it’s the real world…and unless you’re handing out boxes of Soma while you ask people to take the mark of the beast, people will react in angst against this system. I pray for Divine Intervention! but then again, I cling to my Bible.

Posted by Jeremiah | Report as abusive

There have been many intelligent and interesting arguments listed above concerning the economic mess we now find ourselves in.

In my 54 years as a U.S. citizen, I have only experienced persistant inflation, one bout of high inflation and several modest recessions. A little deflation now sounds like a good process to help keep things balanced. I am lucky to have avoided anything like the great depression of the 1930′s.

Over the last 15 years, I’ve tried to save/invest 5-10% of my income in a mixture of stocks, bonds and CDs. I paid off my modest house off 13 years ago and made the decision that buying a huge McMansion was not a good idea financially. I pay off my credit card each month. I purchase plenty of sensible insurance. I only have one debt, a small car loan. I live conservatively within my means and try to realistically plan for an unpredictable future. I resent that the Fed has kept interest rates so low for the last 8 years. I see too many people that have been living a false financial dream that is now, rightly, turning into a nightmare for them.

I would bet that the U.S. will continue to print more money and lower interest rates again to try to get us out of this mess. People seem to tolerate inflation more because it is stretched out over time. Printing more money means debts are more easily paid off with cheaper dollars. It will give us all the illusion that the economy can get back on-track so that we can mindlessly consume even more stuff. People who think that saving money for tough times is a prudent thing (like me) will continue to be suckers. Inflation will continue to eat away at your savings.

There’s always some convenient reason to keep lowering interest rates and printing more money. This time the reason is a month or two of deflation … oooohhh …. so scary!

Don’t bet on our government finding a balanced solution to this mess. In the long run (2 years???), inflation will again rear it’s ugly head in a bigger way. Too many U.S. dollars spread around the world will come back home to roost. I don’t have much trust in the U.S. dollar.

My advice is to invest in anything you think will be a good hedge against inflation.

Posted by Gary Peters | Report as abusive

I do not quite understand that how far these speculators can go. It is understandable that economy is in big problem. There is not a single economist could emerge with a solution.However, the speculators are taking advantage of this confusion.
Americans vote for President Bush. Now the economist burn their brain to solve these masses. Why not those Americans who vote for President Bush they solve them. It is easy to interupt the economy but it is not easy to run it.

I’m glad that everyone is starting to understand that a debt-based monetary policy wasn’t the way to go, well everyone except John Kunick. Is there a coincidence that both Peter Schiff and Ron Paul knew that the American Economy was going to collapse? Absolutely not. Any student of the Austrian School of economics could have told you that. Visit mises.org.

Posted by Henry Melgar | Report as abusive

Just months ago we were in the midst talking about rising inflation. Now the frozen credit market and scare of deflation is looming. Things change a lot quickly.

Funny thing is as much i would like to see how this whole thing works out to better, i cant wonder and see it going horribly wrong.

With fingers crossed for a happening 2009 (in a better way)

-
Regards ThinkJayant

I just hope the Democrats stop spending really fast as soon as we return to inflation. I don’t want to hear, “Gee, isn’t it still happy hour?”

Incidentally, why is there so little talk of derivatives? I already suggested that James do a column on them. We seem to have derivatives in the amount of 8x-20x Gross World Product (yes, world). What the hey are these things, options to buy unicorns? Realistically, how many have to go “poof” and whose pocket catches fire?

Posted by Pete Cann | Report as abusive

The thing nobody seems to be asking is what happens when there’s no more room to cut rates because we’ve hit 0%? People assume things will get right before then, but if the solution is also the source of the problem (printing more money out of thin air), then why would anything change?

Posted by TheCaptain | Report as abusive

But, people ARE spending. The demand side of the economic equation has changed/is changing.

Leading edge consumers are opting for more sensible product. Spam company is working seven days two shifts but can’t keep up with incoming orders. Long-term food supplies have a 6-10 week waiting lead time. Ebayers are frantically buying silver at twice the mark prices. Retro-seventies gardening, animal husbandry, and do-it-yourself books, tools, equipment have doubled in price due to demand. In a down real estate market, prices of good farmland have tripled. The list of such grand anomalies grows daily. Demand is not apt to be a future problem when mainstream retailers (suppliers) stop fishing with the wrong bait. (Just how many belly-rings does a family of four require?)

We have all been looking in the wrong direction. The US public needs value for their dollar, not more garbage for landfills: a vehicle built to be dependable with generic parts available–a vehicle the owner can keep running. An appliance that works flawlessly for more than two years. Tasteful clothing that wears well.

Never mind bailing banks and slippery stocks–put our money into retooling for an economy that offers essential product/fair wage/incentives to save. How hard could it be to do things open and right with the best interests of all? Such a business model can’t be more complicated than the underhanded one we are emeshed in now!

Why should America continue to buy and buy and re-replace items that won’t last. When will the throw-away society with its throw-away mentality end. It’s ending now. Never thought I’d live to see it.

re: “…potentially causing a new bubble. (Who knows what that would be — dirt, water, baseball cards?)”

I wouldn’t be surprised if, in our lifetimes, someone links growth-investments to water somehow. Seriously. Yes, I understand that you, the author, meant to be humorous, ridiculing market tendencies to overvalue the fad of the moment. But… Water sources are decreasingly public, increasingly private. Trading risk and profit opportunities, based on which company is best able to exploit public need (a.k.a. potential of drought and scarcity) isn’t as ridiculous as we may wish it were, and may indeed become the cause of a new bubble in our lifetimes. I realize it sounds like future-fiction, but if the way things are set up now remain and are perpetuated, the likeliest outcome is that competing capitalist interests will be fighting over water rights soon. (Need I mention that it’s a global problem with vast economic impacts, and historic precedents, too?)

A Google search of ‘water wars’ brings up more links and suggestions than I would have imagined. With a quick glance at some of the items I found:
– the site http://www.worldwaterwars.com/
– a TomDispatch.com / AlterNet.org / MotherJones.com article about water issues in the U.S. http://www.motherjones.com/commentary/to mdispatch/2008/09/water-wars-in-america. html and
– waterwars.pulitzergateway.org “about the struggle for water around the world.”

I’m no expert, but do think it’s in the public interest that more citizens pay attention to water rights, even if you’ve never had more problems with getting water than leaky faucets. It’d be best if we pay attention, educate ourselves, and are diligent about protecting water for humanity’s future. [yeah, that's a vague conclusion, but this is just a posted comment.]