Good thing we aren't on the brink of deflation then.
When there are too many consumer dollars chasing too few goods, you get inflationary pressure.
When there are too few consumer dollars chasing too many products, you get deflationary pressure - and it's why our businesses have had to lay off so many workers: because they lack a sufficient volume of consumers.
Of course, the fed has used every trick in the book, including quantitative easing, to prevent a full blown deflationary spiral - but this runs the risk of making the landing harder.
Prior to Reagan, the Fed concerned itself with full employment. This was done partly to prevent the kind deflationary pressure that results in spiraling layoffs. Then uncle Milty convinced us that the Fed was causing inflation ... which was eating away at the very purchasing power needed for economic growth. So we shifted to supply side economics and austerity, and we spent 30 years brainwashing people against government intervention on the labor & demand side... which left us in no position to launch the kind of stimulus needed in 2008.
Crude Keynesianism is when you continue to apply stimuli to the economy
after the growth engine has started and things are red hot.
Crude Reaganomics is when you continue to apply austerity after demand is dead.
During the postwar years, prior to the Republican takeover of the economy, there was more balance to our fiscal policy. Meaning: the government supported labor/consumption (with favorable labor & trade policies, along w/generous education, health, retirement, & cost-of-living aid) ... and/but government also supported suppliers (with a whole array of subsidies). Then Reaganomics convinced us to withdraw the support for Labor and Consumers so that we could transfer all those resources to the suppliers (in hopes that the jobs would trickle down). But Reaganomics pulled the ol' switch'aroo as the jobs slowly trickled to China, Taiwan and Vietnam so that our corporations and investors could dine on workers who made less than $5/day. De-industrialization accelerated rapidly under Reagan and Clinton, leaving a superfluous workforce in our dying American cities, punctuated on the periphery by suburban Shopping Malls filled with a middle class whose stagnant wages and monopolized heath care left them to buy cheap Chinese goods with credit cards.
And so consumers spent 3 decades going into debt, i.e., trying to make-up for the money that never trickled down. Of course, we called it Morning in America (because a radical expansion of credit, like meth, can definitely jumpstart your system. But eventually... you crash, which is what happened - and now we have the most indebted middle class in world history . . . and the fake credit democracy which worked so well in the 80s and 90s has run its course. The final phase of Reaganomics is here... which is the conversion of the American middle class into a 3rd world labor market)
We had a good ride, but the country was taken over by a terribly misguided political movement 30 years ago. It made the rich richer at the expense of everyone else. It started when Reagan ignored the energy crisis on behalf of his oil donors (and set us up for the $5 gallon)... and it ended when the wealthy bubblized the housing market in order to abscond with whatever wasn't nailed down.
This nation swallowed poison in 1980 and the patient is almost dead.
