With a coordination that I am sure both found embarrassing, The New York Times and The Wall Street Journal both ran stories on Saturday with tips on how to deal with a bout of deflation.
This raises several questions. Do we expect deflation? If so, why? What is deflation, anyway? Why is it so bad? Is the advice from these two giants of the mainstream any good? And what was it about last weekend that inspired them to write about, of all things, deflation?
That’s a long post’s worth of rhetorical questions. So, without further ado, let’s dive right in. Personally, I do not expect deflation in the near term, at least not enough to notice. Whether or not it is expected, or even seriously worried about, in the larger investment community is a harder question to answer.
The WSJ opens its piece telling us that “The markets are signaling that a bout of deflation may be coming.” But the only market indicator cited is a rally in bonds. True, the yield on 10-year Treasuries is down this year, although it is up from where it was at the end of 2008. And yet a rally in bonds is not exactly an unambiguous statement about deflation. The bond market goes up and down all the time. Why is this rally a deflation prediction?
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A while back, I wrote about the assumption made by many personal finance gurus that rich people are good with money. This is a basic tenet of a variety 
of millionaire secrets books, that those rich folks got that way because they knew tricks you don’t. Of course, I don’t think it’s anything like that simple.
A new-to-me blog called Pop Economics (which I found via Smart Spending – Thanks Karen) recently brought up a similar but more philosophical question. Are smarter people better with money?
At one level, it is a silly question. Does anybody believe the contrary hypothesis, that they are worse? More or less by definition, we consider smarter people to be a little quicker to pick up mental skills and gain wisdom. That is what smart means.
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A little while back the Wall Street Journal ran a pair of articles about things we should do in preparation for the inevitable effects of the federal budget deficit. Brett Arends led off on February 4 with The Deficit: How to Protect Yourself and then on the 6th we got a round up of advice from most of the rest of the WSJ staff in Protecting Yourself from the Giant New Deficit: How to Keep the Scary U.S. Debt From Eating Up Your Assets.
To a degree, items like these almost comically miss the big picture. They remind me of pieces popular a while back that said that in anticipation of global warming we should all buy land in the Canadian interior. If the government continues on its present course, and I for one am not ready to concede that that is a certainty, it will be an economic calamity that will make us all drastically worse off. The best thing a person can do about the deficit is to vote for leaders willing to do the ugly and unpopular things necessary to reduce it.
But if you can ignore the big picture and focus on only the near term effects of the current and upcoming deficits, it is possible to come up with some coherent advice. Not that the crew at the WSJ consistently do this.
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I like television. I don’t love it. Outside of baseball season I’m not a daily watcher. But it’s a nice thing to have in the house. I even think of it as a relatively cheap form of entertainment.
Much cheaper, for example, than its closest analogue, going to the movies.
Apparently, I was wrong. Turns out, each hour of TV watched costs me $4 in increased spending. This from Juliet Schor, currently a Boston College sociologist:
"Television viewing results in an upscaling of desire. And that in turn leads people to buy." Her study found that every additional hour of TV viewing per week boosts spending by roughly $200 a year.
(This from Money Magazine at CNNMoney.com via Consciously Frugal via Fiscal Fizzle via ABDPBT. The opportunity to run a fourth generation link was not the only reason I picked this topic, BTW.)
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The start of a new year is a great time to pause, consider the big picture, and predict the future. So it’s time for me to update a chart I first ran a while back on house prices.
This is adopted from Robert Shiller’s work. He chained together a collection of house price indexes covering different periods, ending with the Case-Shiller Index Composite from 1987 onwards, and then adjusted for inflation.
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Economics, Investing, Media | Frank Curmudgeon | 
August 11, 2010 12:59 pm | 
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