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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Jim McMannis who wrote (23952)	2/19/2005 2:19:02 PM
From: mishedlo	Respond to of 116555

RE:"I agree we MAY see deflation, but not until inflation gets much worse first." Or unless they start measuring "inflation" differently and act accordingly. Why must inflation have to get much worse first? There is no rational basis for such a statement. You may THINK inflation will get worse but there certainly is no need for it. With the outstanding credit bubble the only requirement is a popping of that bubble. PERIOD! As long as the credit bubble keeps inflating deflation will be kept at bay. But..... As long as the credit bubble keeps expanding it will also make the subsequent deflation all the worse. There is no requirement that says the credit bubble has to keep expanding here. WHEN NOT IF credit starts contracting the "inflation" you see will vanish before your eyes. I am amazed that people think there can possibly be inflation once that credit bubble pops. I am further amazed that everyone thinks it will take some massive spike in 10-yr treasuries to get that bubble to pop. And finally I am most of all amazed that when it pops people think that it MAY cause deflation rather than 100% without a doubt be the very essence of deflation. ie contraction in credit accompanied by falling asset prices (stocks and real estate) Mish