Wednesday, April 22, 2009

Lawyers are losing their feathers

The next step in the progression toward full blown deflation is emerging. Psychologists who treat the neurotic upper middle class are reporting widespread fee reductions in an attempt to maintain a client base. Even corporate lawyers whose own mothers are afraid to call them lest they be billed for the hours are shifting to offering clients discounted flat fee plans. Their mothers still get billed.

The consumer price index has shown the first year to year decline since 1955 but prices can move up and down and not actually reflect inflation or deflation. The actual cost of things depends on real world events like the availability of oil. Of course the price of oil has everything to do with market manipulation and the criminality of that is another issue. Cut backs in things like eating out or not buying a new BMW creates job cuts but not deflation. But once people start cutting wages and especially service fees you can see that deflation is setting in.

True inflation or deflation has to do with the management of money supply. To much debt creation is what causes inflation. When huge, unrealistic debt loads can no longer be maintained the money supply gets out of control and starts to collapse. This is deflation and is what defines a Great Depression. Deflation causes the collapse of the entire debt load since the reduction in cash flow makes paying interest and principle impossible. The cash flow crisis then spreads throughout the system dragging down people and businesses who aren’t in debt as well.

So you see, lawyers are like the canary in the coal mine or the shark in the fish tank (well you get the idea). Money needs to be injected into the system from the bottom, not the top. It has to be used to create an actual economy and not just more paper on a bank balance sheet. If enough lawyers can’t make the payments on their Mercedes we might get some action.