i agree with that
And so do I. There's altogether too much argument simply for the sake of argument on SI. As for the inflation vs. deflation argument, my views are closer to your's - at least longer term. The deflationary forces should not be under-estimated, for they are quite significant. They always are at the beginning of a secular bear market. The over exuberance of the prior mania period results in such over capacity and saturated demand, that if unchecked, deflation will certainly rule. This was true in the '29 - '49 and '66 - '82 secular bears - as well as today. We know, the behavior of the Fed was radically different in the '70s from what it had been in the '30s. Many (including the entire Monetarist school of M. Friedman) believe it was this different behavior that resulted in the '70s having inflation, while the '30s had deflation.
If the Fed has its way, there is little doubt which path they have chosen. So one way to frame the inflation vs. deflation debate is to ask yourself is there anything different today, relative to the '70s, that would prevent them from repeating their "triumph" (if you can call inflation a triumph)? Certainly the over capacity and saturated demand factors alone are insufficient - they were there before. What is different this time is the exported deflation from Asia. Is that additional factor sufficient to defeat the attempts of the Fed? Personally, I don't think so, but we'll all see in "the fullness of time".
Currently, I view the inflation - deflation battle in terms of functions. The deflation function is initially stronger, but it is at its most powerful stage. The inflation function is initially weaker, but gradually gains strength as more and more dollars are pumped into the system. The resulting composite function, which we experience, swings first towards deflation, but ultimately inflation dominates. This composite that we experience is not so much a compound as a mixture - with elements of inflation and deflation existing side-by-side. This amalgam will persist for the next several years.
Most if not all, JMO
lurqer |
