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Found this article on FS by Eric Andrews. One of the better summations of the inflation/deflation argument (EJ is given credit as well) and how our current situation is unique:
http://www.financialsense.com/fsu/ed...2009/0921.html
I recommend reading the whole article but here's an excerpt of its conclusion:
http://www.financialsense.com/fsu/ed...2009/0921.html
I recommend reading the whole article but here's an excerpt of its conclusion:
This goes back to Prechter's timing; that Deflation will happen FIRST, before the government can or will react. And they're proving that with a whole year's insubstantial actions. But this is also Janzen's “Ka-Poom” argument, that Deflation will happen first, for a few real months as in Argentina in 2001, but that any modern government on a strictly symbol-based currency, will always inflate rather than allow Deflation to take its full course. In his scenario, the latent inflation finally takes the upper hand in a total loss of confidence, causing near-immediate hyperinflation. But on this one thing, both sides agree, both the King Deflationist, and the key Inflationists—inflation occurs during a boom as credit is expanding, then credit pops and contracts, it is repudiated, and then...ULTIMATELY...? Inflation or Deflation?
Which will it be? Despite arguments to the contrary, we can't know. Although no symbol-based modern currency has ever chosen Deflation, the world has never yet been on a global fiat standard during the downturn of the 70-year Kondratiev cycle. So we can't guess. Functionally it can go either way. To save themselves, banks and creditors could choose to foot-drag until the whole Deflation is over. Or to “save the people”, Governments could seize the real power of the printing press and thereby create a mechanism for true inflation that does not presently exist. Personally, I believe a third thing will happen instead: that accounts are so imbalanced and are such a mockery of reality that the present system will disintegrate to be rebuilt piece-by-piece, and the dollar will vanish in its present form, perhaps reformed in one or three world currencies, perhaps with a dollar backed by gold at a far lower rate.
Although that's my opinion, we can't know for a fact who will get the upper hand in that eventual struggle. I cannot tell you which side will ULTIMATELY be right, in the very long-term, for each will be right in their own time. Life is a story that doesn't have a neat endpoint, but goes on and on.
But by their own actions we now know one important thing: they are not inflating, even with such desperate realities as face us today, and there is no reason to think they will until something happens. How do we know? They've already told us with actions louder than words.
Wait for The Event. Position yourself for it. It will be Deflationary, for by public standards if it were Inflationary to assets, that would be called a “good” thing, not a crisis. Then, after the Deflationary economic or geopolitical event, then we will see.
But first things first. Wait for The Event.
Which will it be? Despite arguments to the contrary, we can't know. Although no symbol-based modern currency has ever chosen Deflation, the world has never yet been on a global fiat standard during the downturn of the 70-year Kondratiev cycle. So we can't guess. Functionally it can go either way. To save themselves, banks and creditors could choose to foot-drag until the whole Deflation is over. Or to “save the people”, Governments could seize the real power of the printing press and thereby create a mechanism for true inflation that does not presently exist. Personally, I believe a third thing will happen instead: that accounts are so imbalanced and are such a mockery of reality that the present system will disintegrate to be rebuilt piece-by-piece, and the dollar will vanish in its present form, perhaps reformed in one or three world currencies, perhaps with a dollar backed by gold at a far lower rate.
Although that's my opinion, we can't know for a fact who will get the upper hand in that eventual struggle. I cannot tell you which side will ULTIMATELY be right, in the very long-term, for each will be right in their own time. Life is a story that doesn't have a neat endpoint, but goes on and on.
But by their own actions we now know one important thing: they are not inflating, even with such desperate realities as face us today, and there is no reason to think they will until something happens. How do we know? They've already told us with actions louder than words.
Wait for The Event. Position yourself for it. It will be Deflationary, for by public standards if it were Inflationary to assets, that would be called a “good” thing, not a crisis. Then, after the Deflationary economic or geopolitical event, then we will see.
But first things first. Wait for The Event.
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