On many of the recent articles on LvMI and even on Youtube Vids there have been a plethora of posts stating that because of the myriad of companies that are having it assests liquidated there will in fact be deflation, and not even the credit injections supplied by the FED will in fact fight this contraction. So, my question would be: Are they right or if not, how do I respond to them?
Bump
Luis Buenaventura: On many of the recent articles on LvMI and even on Youtube Vids there have been a plethora of posts stating that because of the myriad of companies that are having it assests liquidated there will in fact be deflation, and not even the credit injections supplied by the FED will in fact fight this contraction. So, my question would be: Are they right or if not, how do I respond to them?
deflation is expected after a bust in the economy(since certain assets were overvalued, prices have to come down). also, when loans made in a fractional reserve system default, dollars actually do disappear, which is also a big part of the deflation. what most mainstream economists are worried about is the idea that deflation leads into a deflationary spiral, where the rising value of the dollar cause people to horde their money forever as the dollar rises until the economy blows up(thats an extreme simplification of the idea of the spiral, but it is essentially that ridiculous)
to fight this deflation the government has pumped tons of credit into favored banks, but these credit reserves will only begin to be lent out when entrepreneurs can gauge where capital can best be allocated in the economy. it is only when this lending commences, as the economy gets back on its feet, this credit will be lent out which, in conjunction with the multiplying effect of the fractional reserve system, will necessarily cause inflation. the rate of inflation or the possibility of hyperinflation is entirely contingent on how fast these reserves will be lent out.
in short, deflation first, then long inflation.
I echo those sentiments.
More worrying:
Irish Liberty Forum
MatthewWilliam:
Not only monetary base, also excess reserves of depository institutions. I beg to quote:
2008-01-01 1.6402008-02-01 1.7242008-03-01 2.9782008-04-01 1.8442008-05-01 2.0112008-06-01 2.2722008-07-01 1.9772008-08-01 1.9882008-09-01 60.0512008-10-01 267.9052008-11-01 559.0512008-12-01 767.422
Sphairon:2008-01-01 1.6402008-02-01 1.7242008-03-01 2.9782008-04-01 1.8442008-05-01 2.0112008-06-01 2.2722008-07-01 1.9772008-08-01 1.9882008-09-01 60.0512008-10-01 267.9052008-11-01 559.0512008-12-01 767.422
*shiver*
Was in Washington for a school field trip (yes I'm still at that age), but thanx anyhow for the responses.
Luis out.