sea_biscuit.
((The deflationists out there are celebrating that they have been proved correct! So funny. Makes no sense to me whatsoever. Why can't there be new (nominal) highs later in the year? The Fed is ready to drop money via helicopters if that is what it takes to make a new nominal high.))
I'm not so sure I'd equate "deflationists" with "crazy people", "moonies", "Scientologists", "Britney Spears" or "UFO-spotters". [Of course, that's not what you said in any way, but I do sense you feel they ought to have their heads examined. :) ]
I really do feel that anyone who doesn't possess serious humility in these very dangerous times is treading on very dangerous territory. IMO, to "celebrate with glee" either a deflationary or inflationary outcome is to be WAY too attached to one's biases. In the end, the market and economy will do what it will do - and we will have to adjust our theories to the reality, and not vice-versa.
I can certainly see how there could be a hyper-inflationary outcome here. But I can also see how the deflationary forces of a credit bust could overwhelm attempts by central banks to recapitalize (which is NOT the same thing as "reliquify") the global banking system. As I stated in a previous post, in the end, many many people will have to SAVE more in real terms, and SPEND less in real terms. And that isn't fundamentally solved by either inflation or deflation. Rather, to my mind they're just different strategies for apportioning the suffering of the inevitably tramautic readjustment process. And this is not a process where the US or the Fed can unilaterally dictate terms and conditions. If they could, yes, hyperinflate away and consequences be damned. But I don't think that's the case here - and even if it IS the case for a while longer, it most certainly cannot be the case in perpetuity.
As Russ says "In the end, we all sit down to a banquet of consequences". I do not believe that inflation is an easy way out of avoiding the banquet.
But ... I could be wrong. :)
glenn |
