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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: Crimson Ghost who wrote (86978)9/28/2008 12:26:20 PM
From: SouthFloridaGuy5 Recommendations  Read Replies (2) of 116555
 
I think you're missing the point. The inflation versus deflation argument is idiotic because almost 90% of the parties on both sides agree on most of the issues. At this point it's a side-show discussion like "lipstick on pigs".

The authorities desperately want inflation in order to prop asset values, but not the inflation they have been getting which has been counter-productive.

There are truths in both the inflation and deflation arguments, but there are several facts which the inflationists cannot debate, IMO.

There is no imminent inflation with regard to key components of the true inflation measure:

wages, rents/housing, profits

Furthermore, the deleveraging of the American and European banking systems are now inevitable. $700b is a drop in a black-hole versus the amount of deleveraging that will occur in the banking system. As Jim Rogers says (paraphrased), it's a band-aid for a cancer patient. The Fed lost control of the money supply long ago when it outsourced it to the banking sector. Banks will not and cannot make loans until the general macro-economy is stabilized and unlevered asset values are downright cheap in real terms.

At the same time, the effective printing of money will ensure continued depreciation of the dollar thus raising the cost of pretty much anything that comes out of the ground such as oil, copper, etc.

So unless you think that rents and corporate profits will see a major inflationary tailwind due to the U.S. gov't action, the more likely outcome is a kind of-sort of stagflation.

Truth be told though at the end of the day, we're just getting damn poorer and I think everybody can agree to that regardless of whether it's inflation or deflation.
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