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Strategies & Market Trends : Heinz Blasnik- Views You Can Use -- Ignore unavailable to you. Want to Upgrade?

To: NOW who wrote (2216)	6/9/2003 1:47:41 PM
From: Perspective	Respond to of 4905

Inflation is a monetary phenomenon, but people regularly misrepresent the definition of deflation. Here is the strict definition:" A persistent decrease in the level of consumer prices or a persistent increase in the purchasing power of money because of a reduction in available currency and credit. Hence the confusion. People regularly use deflation to mean the debt effects that cause it. The Fed can prevent deflation by buying whatever securities it wants to, but it can't prevent the redcution in economic activity associated with excess debt and capacity, and falling employment levels. So, the answer is actually - inflation will win. The Fed will insure it. Don't fight them on this one. However, in real economic terms, the deflationary demons will win, as excess debt and capacity act to suppress corporate profitability and employment for the forseeable future, until debt is purged to low enough levels and confidence is purged enough for the cycle to start all over. BC