Quote:
Originally Posted by The Demon
Yea, shorting equities is the way to go. I've taken advantage of the low volume trading and get high dividend paying stocks for now, obviously short term. With that said, I'm not partial to the deflation theory. I don't even see how it's possible. We're in a period of disinflation and QE right now but Bernanke would have to be dumber than he already is to introduce negative interest rates while contracting the money supply. I'm on the inflation/hyperinflation bandwagon. Deflation would just be a step before those but I doubt it would happen.
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Yeah, but haven't we been in a dis-inflationary environment since Volker?
A serious credit contraction combined with debt defaults is deflationary. That is evident and likely to continue -- both in the US and EZ.
What the government is trying to do is inflate... ie; to get the credit wagon going again. Hence the fiscal and monetary stimulus. Hence the fear of inflation / hyper-inflation. It's just not working because the deflationary forces are that large. Banks are not lending money and consumers are not borrowing or spending like before.
Look at all the austerity measures being introduced around the world. This is what the tea party, conservative crowd is also screaming for. Guess what... deflationary.
I think it is easy to see the possibility of deflation first. Doesn't mean it will happen, though.