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Originally Posted by wig
Yeah, but haven't we been in a dis-inflationary environment since Volker?
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I'm pretty sure we've had disinflation on and off for the past 10 years.
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A serious credit contraction combined with debt defaults is deflationary. That is evident and likely to continue -- both in the US and EZ.
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It depends on what you view deflation as. I view it as negative interest rates and a contraction of the money supply. The concept of quantitative easing contradicts that concept of deflation.
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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.
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Actually, I think the banks ARE lending money but the consumers are neither borrowing nor spending. And it's not working because of the massive dollar debasement that has been plaguing this country since Obama became President, mostly because of the abuse of the printing press.
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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.
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I think the tea party is screaming for deregulation, not necessary deflationary measures.