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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Tommaso who wrote (276368)2/5/2004 10:56:42 AM
From: mishedlo  Read Replies (1) of 436258
 
Much of current personal debt will have to be wiped out by bankruptcy, both of individuals and institutions--perhaps even entire states.

This event would be profoudly deflationary except that Federal government expenditures will continue, and also personal bank balances will be protected by the FDIC. The government will have to create money to cover these expenses. Borrowing by indivudals and businesses, however, will become more difficult and credit-worthy borrowers will have to pay higher rates.


Agreed but we do not see that inflation until a good portion of those debts are written of by Bankruptcy. Look how long Japan was able to hold off (and still are!). Not sure we can hold off that long but it sure will not be overnight or next year.

Mish
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