Digital Deflation

by Graham Tanaka

Robert Shiller's Irrational Exuberance contends that the stock market is a massive bubble. In Digital Deflation, Graham Tanaka takes Shiller to task, flatly contradicting everything Shiller says. The... This description may be from another edition of this product.

• Format: Hardcover
• Language: English
• ISBN: 0071376178
• ISBN13: 9780071376174
• Release Date: August 2003
• Publisher: McGraw-Hill Companies
• Length: 418 Pages
• Weight: 1.85 lbs.
• Dimensions: 1.5" x 6.3" x 9.3"

Customer Reviews

Keeping inflation down was actually causing deflation

His theory points out the government measurement of the state of economy was done with missing key components which are the sources of new economy drivers: digialization. The monetary policy derived from the missing measurement, digital deflation effects, would lead to a bad policy. Indication of low inflation was actually "deflation". Graham Tanaka has an excellent insight!Everyone should read this book.

Insightful!

Imagine that companies throughout the economy had access to new, better technology every year, and made better products without raising prices - in fact, while cutting prices. Now imagine that the regulators and policymakers used outmoded measurements and models that ignored these quality improvements and this downward price trend. Imagine that the Federal Reserve saw a risk of rising prices even when prices were falling. Imagine that the Fed kept tightening the economy unnecessarily, sending interest rates up, slowing growth, inducing stock market crashes and recessions, and doing the opposite of what it should. If you can imagine all this, you have a picture of U.S. economic reality as seen by author Graham Tanaka. It's a picture no one, especially investors, should disregard. We found his book immensely interesting - too long by half, with too many repetitious references to his previous publications (perhaps just his way of saying, "I told you so"), often tendentious and labored, but not to be ignored. Just be cautioned: this sounds somewhat like the bubble speak we heard at the end of 1999 and the beginning of 2000 - other times of strong growth without inflation.

Shining a Light on Statistics

While statistics from the Government and other sources get the headlines, frequently "drilling deeper" is even more important. In an interesting and well written book, Graham Tanaka has debunked a lot of myths. While many will disagree with parts of his theories, depending upon their own perspectives, Tanaka has compiled a well thought out explanation of why inflation in this country has been, and continues to be, significantly overstated.Since the policy ramifications and the true valuations of the stock market are dependent on statistical underpinnings, Tanaka's facinating research shines a light on what is truly going on. While I suspect all of us who use technology and appreciate the ever increasing value it provides, the underlying value has not been quantifed as significantly until Tanaka came along with his research.Even if you don't agree with Tanaka's hypothesis or his stock market valuation conclusions, this book forces you to think. Hopefully it will be widely discussed among those in policy making roles!

A Must Read Book!

Mr. Tanaka did a very good job with this book. He presented us with both new and old theories about investing. The chapters are in depth and concise, which provides the reader with both, the necessary background and his thought out theories. Mr. Tanaka gives us a new and innovative perspective on how the economy will "ignite" in the upcoming future.The theory of Digital Deflation is solid! It is rooted! And it holds true! Technology improves every year; year after year we see new models of phones, PCs, laptops, etc. always superceding the previous ones. However prices remain relatively the same. Tanaka explains this phenomenon as "Digital Deflation," not in the sense that the prices are falling, but in the sense that the consumers are getting more for their money. In other words, "Digital Deflation" is a good thing. As Tanaka puts it; the product is "Faster, Better, Cheaper!"Tanaka also explains why some theories work and why others don't. He reveals the many benefactors that helped the economy boom during the 1990s; at the same time proving the inaccurate data that the government used to measure inflation. He explains why our economy was flourishing, and how we could go back to those good times. In addition, he gives investors the information needed for them to capitalize in their investments in the long run. Tanaka takes the mystery out of the New Economy.I was very impressed by the depth of research, the effort put into this book, and interviews with some of the most influential leaders of the "Digital Revolution" era such as Michael Dell and Gordon Moore. The tone used is really profession, formal, and captivates you. Definitely, you must read this book if you want to understand how to invest in the New Millennium. It is a must have for all investors!

Investors and Policy Makers Need to Read this Book

Graham Tanaka is a sucessful investor and economist who has written an important, insightful, thought provoking book that is a must read for investors and economic policy makers. "Digital Deflation" is written from an investors and policy makers perspective. It is readable and applicable to decision making. Readers will find sufficient quantative support to believe Graham's conclusions are solidly supported by fact. But readers will not be lost in theoretical gobbly gook that sometimes is found in economic text books. The book's analysis ranges from GDP accounting to evaluating how companies and stocks are responding to the New Economy created by increasing digital deflation.For me, the main benefit from reading "Digital Deflation" was that it allowed me to better understand and quantify how an increasingly digital economy is being incorrectly meausured and how this mistake is effecting investors, policy makers, the economy and markets. It also made me appreciate what future economic growth is likely to be if policy makers make correct decisions and if they don't. Graham, who believes that policy makers will not make large mistakes, argues that economic growth can be meaningfully and sustainably higher in the next 5-10 years due to the impact of increasing digitization. That is really important for investors. Although there is signficiant discussion of demographics and their impact on the economy and markets, the main "Digital Deflation" point is a convincing case that GDP, productiviy, and inflation measures are all being incorrectly meaured and misunderstood due to increasing advances in digital and software technology that is spreading throughout the entire economy. Medical products and automobiles are but two examples of two non-technology industries being beneficially and rapidly altered by digital deflation.Graham and a handful of economists and Fed policy makers are uncovering the depth of the mismeasurement and its implications. Anyone who understands the extent of the mismeasurement and how the New Economy is evolving will be able to better understand how the economy will behave in the future and how the markets will react.A key point from Digial Deflation: Graham convincingly makes the point that the trend toward digitalization is accelerating, not slowing, and that the economy can grow at a much higher growth rate than previously expected without generating inflation. If Graham is correct, and I think he is, then interest rates and Fed policy can/must remain more stimulative for a longer time than generally expected in order to generate job growth. That is good news for investors and corporations. Graham makes the point though that there is real risk to the economy, markets, and particularly employment growth, if policy makers do not understand digital deflation and don't provide sufficient stimulus to the economy when increasing digital content is generating productivity gains superior to any previous period in our history.Th