Asbytec

7 Key Points About Deflation

Funny how a simple housing market down turn in the US can bring the world to it's knees. Imagine the deflation if or when other productive assets fail.

You are exactly on the mark about asset bubbles. We can ill afford to run an economy on fiat money from one bubble to the next. Does this mean our post industrial economic experiment is a failure? I think so.

We need to get back to real GDP, real jobs, real science and technology; less debt; and a currency backed by something tangible. In the end, I think we will.

Dude, you are singing my song on the fiat currency issue. And, I am not afraid of a little deflation. I am betting and counting on it. I also do not fear inflation, I understand the fiat money supply is falling faster than the Fed can inject new liquidity. And I think this will be a long term trend as asset values continue to drop over time.

I believe, by the time inflation begins to rear it's ugly head, the fed might have marginally more control over the money supply and we will probably be recovering from recession by then. (Timing is everything, of course.) An interest rate hike would then be in order. Our dollar should remain strong through this crisis and beyond.

In the end, I believe we will recover to a tighter money supply and lower, more sustainable global growth not fueled by American credit cards. It'll hurt for a while, but whether Obama is prophetic or lucky, change is coming.

I think this crisis might make the great depression look like pneumonia. It'll be bad and hopefully just avian flu bad...but it could turn into pneumonia.