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

To: mishedlo who wrote (53599)	7/18/2006 10:59:36 PM
From: skinowski	Respond to of 116555

From Saville: After all, there must be some limit to how much debt people will be able or willing to take-on and, with the savings rate in negative territory and debt repayments constituting an uncommonly-high proportion of disposable income, we simply MUST be close to that limit. The problem is, the argument for deflation outlined in the above paragraph is based on the incorrect premise that the consumer is the engine of inflation. And when you start with an incorrect premise and then apply perfect logic you are GUARANTEED to come to the wrong conclusion. ............... With all respect, I think he is doing a good job creating and then beating up straw men. The issue - imo - is not whether consumers are the engine of inflation, but whether or not they may act as (one of) the engine of deflation.... I am not convinced that inflation is an "active" process, and requires printing... whereas deflation is passive and happens all by itself. I think both involve a deep and active change in the public's mindset. We all know that the government can print - and may at some point actually resort to "unconventional" methods of introducing liquidity. But that would be very destructive to the financial and monetary systems, and to the society as a whole - and it will not be done lightly. My guess - it will probably happen after deflation becomes too hard to take... and there is severe political pressure to open all spigots.