Jay, I believe that deflation is not only happening in the manufacturing side but also in the commodities side. And, yes, the central bankers will print lots of cash to combat it.
What will happen afterwards is anyone's guess. A golden equilibrium may be reached. The problem is that the central bankers and other policy makers have no memory of deflation. The only institutional memory is for inflation.
Don't follow the cause and effect in this part of your message. Not saying you're wrong, I simply don't get it.
Between manufacturing deflation, service inflation, relocation of factories, spreading of income generation, overall increase in demands for commodities, wealth (what is left of it) will be redistributed, from developed countries to China/India/Russia, from creditors to debtors, from Japan to the US/Europe/China, from the world to Argentina (in a manner of speaking, on what is left of it).
If, as noted by other savvy posters, the velocity of money has slowed, then perhaps the printing of more and more of it will be even more deadly should, as I would guess would happen once inflation takes hold, its velocity increases.
It seems that the more developed the world gets, the more unbalanced and unpredictable markets and economies become. A perfect study for chaos theorists. The car you did or did not buy in 1995 might be the reason why the bubble came into existence (or became deflated).
The trend is not good. The perfect investment is beautiful real estate. The world is getting uglier and the beautiful places will demand a greater and greater premium. Places like Aspen, Vail, Paris, Tahoe, Hawaii, BVIs, Tahiti, Switzerland, etc., will increase tremendously in value.
Forget the dripping-with-blood-Aztec gold. Beautiful real estate (tropics, mountains, etc.) is the place to invest. |
