(NaturalNews) Every crisis has a silver lining. For years we in the Western world have been taught that the absolute worst thing that could happen to an economy is deflation, a retrenchment in the value of goods and services. Yet deflation is actually just the other side of inflation, and necessary to correct the excesses caused by a long period of economic expansion and inflation. Nature has taught us that balance is the key to life, and when these teachings of the natural world are applied it is easy to see that deflation is the balance for inflation, just as yin is the balance for yang. Although it may initially have negative consequences for many people, deflation will cleanse financial excesses and restore the harmony that comes with balance.
Why people have been taught to avoid deflation at all costs
An economy that is shrinking means a job market that it also shrinking, resulting in job loss for many people and inability of young adults to find a place in the economy. Deflation is seen as creating a vicious circle of declining profits, business failure, bankruptcies, loan defaults and shrinking incomes. Deflation means less profit for corporations and a decline in the standard of living for almost everyone.
The common fears of deflation are based on the belief that the goal of everyone in life should be to accumulate an ever swelling abundance of material goods. It is a goal that is beneficial to corporate interests, but on an individual level it is a goal that has repeatedly failed to bring happiness.
Deflation will bring the liquidation of excessive debt burdens
For a long time Americans have been playing a very strange game. They have taken out mortgages and used credit cards to borrow every dollar they could get their hands on to put on the biggest display of material possessions possible, as though whoever was able to spend the most money was the winner. They finally discovered that no matter how much money they borrowed, they were still surrounded by people who had more stuff than they did. Once they accumulated a huge new house, luxury car and expensive wardrobe, they found they were just like everybody else who had borrowed to get all these things. Most people finally realized that no matter how much debt they took on, they could never be winners at the possession game, but by then it was too late. They were in debt up to their eyeballs.
As people stare in disbelief at their huge debt burdens, the future looks bleak. They are saddled with years of payments, years during which they can watch their high end appliances become outdated, their wardrobes go out of style, and their cars fall apart while they continue to make payments. They are watching the value of their big houses decline, and they shrink from the thought of paying for them another 25 or 30 years. The average American household appears to be facing a dismal future of debt service.
Deflation offers a way out of this debt quagmire. As debt becomes unmanageable new terms have to be negotiated. Lenders do not like this situation any better than anyone else, but they know they have to renegotiate or take the chance defaults will wipe out their investments. When new terms and amounts have been agreed upon, some of the crushing affect of debt burdens will be lifted. People will feel freed from their mistakes to some degree, and able to start over and look to a brighter future.
Deflation means the cost of living will be reduced
Prices are falling for many items needed in the course of daily living. Gas, energy, commodities in general, houses, cars, travel, apparel and more. This is the result of deflationary trends. If these trends continue, look for lower prices across the board. It is a great environment for those with savings because their savings will buy more than they ever anticipated. Seniors with fixed incomes will not have to watch their purchasing power erode every year as they did during the inflationary period.
Deflation will narrow the salary gap
The salary discrepancy between the top executives at most companies compared to the salaries of the average workers will begin to narrow as deflation forces these companies to no longer allow members of boards of directors to approve huge salaries for each other. This is going to give most people a huge psychological boost. They have known that all employees are vital to the functioning of the organization, not just the CEO. Prior to 1990 the average worker to CEO pay ratios were 1 to 100. By the year 2000 that ratio had swelled to 1 to 500, enough to make most workers feel disgruntled.
Americans will have to figure out a way to be competitive in world markets
Americans, once the leaders of the world in ingenuity and creativity will be forced to draw upon their resources again. As workers are no longer forced to accept the highest paying job they can find in order to service their debt, they may be free to find work that actually uses and reinforces their talents and abilities. Design and manufacture of products for world markets will again be part of American life as cottage industries give birth to the renewal of manufacturing in America.
As government stimulus is overwhelmed by deflationary forces, free market principals will again take hold. Prices will begin to reflect actual value and market conditions rather than bureaucratic manipulation.
People may drop the every man for himself philosophy that has so dominated the American outlook in recent times. As more people lose their jobs it will become apparent that people will have to help each other survive. This ability to work together for the greater good of all became the mode during the Great Depression and fostered an era of personal and group cooperation and sharing. Most households that were able kept extra food on hand to feed those in need. This cooperation led to victory gardens, grown to support troops during World War II and to make sure that all Americans had food. These gardens fostered cooperation among family members so absent from the American landscape today. Children were no longer pampered but worked beside their parents to insure the success of the projects. In the process they learned what it was like to work for the common good.
Gratitude may replace envy during a deflationary period
The forces of deflation will act as a leveling mechanism in American society. As people realize the actual economic and psychological costs of trying to achieve ego status and positive self-esteem by buying things, they will begin to abandon the attitude that more possessions is what it takes to achieve happiness. The new attitude will become one of appreciation for what one is left with after the forces of deflation have taken their toll. Resourcefulness and the realization that less is more may replace greed. When greed is no longer the dominant emotion, peace and freedom from stress will promote health and happiness even if there is economic hardship.
Eventually possessions may again have real meaning for their owners. During the period of envy, all people seemed to think about was getting another possession. Then when they got it, it had no meaning for them because they saw that someone else had even more new possessions. When greed is the major theme, no one is ever happy with anything. When gratitude becomes the theme, many people can be happy with almost nothing because what they do have is valued and cherished. Instead of having bulging closets full of clothes made in China that we are unable to relate to on any emotional level, we may have a few well chosen items that were made in America that we can wear frequently and with pride and gratitude.
Money will take on a new meaning
For several years money has meant only one thing in America, a means to get bigger and better material possessions. As such, money has been the source of insecurity for Americans. The search for ever more possessions has allowed people to mortgage their futures to the point where financial security remains elusive for as long as thirty years.
Yet in other periods of history and in other cultures money has meant a way to gain security. People have scrimped, saved and denied themselves material possessions to provide an emergency fund of money, the means to live through a period of hardship, or the means for a secure and cozy old age. For them money was a giant security blanket to fall back on. People believed they could see their way out of almost anything if they had money put aside.
Deflation will help Americans wake up to the fact that possessions actually rob them of security rather than provide it. In a time of deflation people are rewarded for saving money. They do not have to fear constantly rising prices that will erode the value of their savings. Lack of inflation means price stability, and deflation means price decline. In an environment of price stability or deflation, money saved this year will buy the same amount or more next near, not less. Deflation is a powerful force that may ignite a wave of savings like this country has not seen for several decades. The super low interest rates being paid to savers now reflect the perception that the money they save today will retain its value tomorrow.
Deflation will require Americans to again put people first
Deflation means that Americans will no longer be playing the possession game and using their possessions as weapons against each other. Once they stop defining themselves by their possessions, they will be free to define themselves by their ideas, values and beliefs. When they no longer need to impress each other by what they own, they can be impressive by who they are and what they can do. Families and communities may come together again instead of each person sitting alone as a consumer of the latest in electronic gadgetry. Conversation may become the norm again with more formats springing up for the open discussion of ideas and debate. If this happens, intellect and creativity will flourish.
When deflation and cooperation replace inflation and greed, people can stop thinking of entertainment as having people over to admire their possessions and start thinking of it as a chance be with people they care about to exchange genuine ideas, thoughts and tales of experiences. Yes, experience will be valued ahead of possessions in a deflationary time when people come together to share in the commentary of life.
When people are freed from their endless search for more money to buy more possessions they will be able to effectively parent their children again in an atmosphere of responsibility, cooperation and endeavor rather than out of indulgence and guilt. Children will learn to live emotionally healthy and productive lives rather than being mentally dependent well into adulthood.
Parents who do not spend every waking moment chasing possessions will have time to teach their children the manners and respect required to be a participant in adult life. When the barrier of possessions has been stripped away, we will again be able to regain our commonality with other human beings and approach each other as equals. When people stop being mindless consumers they will be able to devote themselves to insight and understanding, innovation and resourcefulness. When this state has been achieved, possessions will again become meaningful as things to value and appreciate, rather than things to devalue and throw away.
There is everywhere evidence that nature abhors excess. The material excess of the last twenty-five years is unnatural. When deflation requires a turning away from excess, people will need something to turn toward. The new experience may be reunion with nature and all things natural, including natural mental and physical health. People may again walk upon the earth and feel empowered by the simple fact of their existence. Their self-esteem may be renewed by a new economy in which cooperation and ability are the measures of success, and where everyone can achieve almost continuous positive feedback.
About the author
Barbara is a school psychologist, a published author in the area of personal finance, a breast cancer survivor using "alternative" treatments, a born existentialist, and a student of nature and all things natural.