Randy_H

Inflate, Deflate or Default

PPP is not 2073% lower today than it was in 1913.

Inflate, Deflate or Default

Russia proves my point. They defaulted. They did not willingly transfer their wealth outside of their borders servicing foreign debt by printing money. They told their debtors to get lost. You'll find that pretty much all hyperinflations since WWII have been caused by/overseen by the IMF, which only holds sway over weak countries.

Inflate, Deflate or Default

Hyperinflation is off the table. It does not occur to nations which maintain credible military force. Regardless, there are so many deflationary forces in the economy right now, I'm thinking that stagflation is our best outcome. Outside of energy and food, nearly everything is deflating rapidly, including incomes (thanks to wage efficiency theory's effect on displacement).

The US faces a very real liquidity trap scenario -- something I thought was relatively unlikely. But we're literally tracing Japan's every step in this mess, including now posting bad debts on the balance sheets at fictitious prices.

Inflate, Deflate or Default

Thanks for this essay. The primary failing of your original thesis as well as its redux is something you yourself pointed to: the LTCM-style error. These sorts of extrapolating macroeconomic analyses tend to either ignore or wrongly consider big tipping-point events which are often not economic or financial in nature, though they are ultimately caused by economic conditions. Just as how in 1928 no one could have extrapolated to 1938, in 2008 I doubt anyone can extrapolate accurately the next 10-15-20 years. Whether war, geopolitical shifts, population or environmental stresses (and related commodity implications) or something else, the current "perfect storm" as you put it is more of a "perfect breeding ground" for large, threshold events to occur.

Predicting whether those tipping point events benefit or detriment the US is impossible.