The conclusion is important, but which one? This Christmas, the next couple of years, or ten years out. Half the confusion on this board is the so-called "end game." Hello, folks, the end game is earth vaporizing into the expanding sun. <g>
In a nutshell, I think the issue that bugs you in particular about Mish's deflationary endgame is that the possibility of hyperinflation between now and then is more important, because it is *that* event which could wipe us out. It doesn't matter if life on earth becomes extinct one day, because we'll be wiped out beforehand. Is that a fair (and simple) assessment?
My view, clinging to more of the Austrian economics I think, is that the monetary deflation (via credit destruction) will decrease demand, throw the US into a serious recession, and cause demand for stuff we "want" (flat screen TVs, computers, cars) to drop, putting enormous pressure on prices of the current over-producers. This is a deflationary headwind and will do much to mitigate the rise in prices caused by a gradual erosion in the value of the dollar. If there is a serious break in the dollar, though, all bets are off. But I view that as a fluke, an out-of-control event, because no central bank wants to see that for fear of the possibly catastrophic near term repercussions.
I expect this to be the battle in the next two years. Prices of stuff we want (including energy) will trend upwards because there will be much less demand destruction, at first at least. Only when things get really bad, if that happens, will medical and tuition, say, go "on sale."
But in the next two to three years, *either* global demand picks up to take up the slack from the drop in demand in the US, or production will be destroyed, cleansing the system from the malinvestment created by the bubble economics.
At some point, unless the US changes course dramatically, our cost of living will rise more or less relentlessly, turning us into Brazil America, as Russ puts it. But I see that point a little further out, with a lot of world wide thrashing and adjustment beforehand.
And yes, there's still time for central banks and war mongering gov'ts to make things much worse in the end.
The "end" to me is about 10 years out, btw. I'm hardly qualified to see 10 days out, so I figure 10 years must be about infinity. <g> |
