Economic commentary: why we won't have deflation in the United States

If we really had deflation, it would mean that the value of savings would RISE. Precisely the conditions throughout most of the 19th century in the US and UK that led to unprecedented growth.

Commodity prices fell gradually. The buying power of money kept rising. Investment was rewarded including long term investment. So private companies raised money for building things like railroads and canals.

Of course, it was exploited by the Powers That Be to reward their cronies, but nothing is perfect. Government is always manipulated this way, but at least government was a small share of GDP throughout *most* of the century.

Deflation is IMPOSSIBLE now. It is a bogeyman used by the powers that be, the banksters, to scare people.

They are all dependent upon the following game:

1. Borrow unlimited fiat through central banking scam

2. Buy assets like equities, real estate, financial things

3. Inflation makes those assets rise in value

4. Pay back the money in depreciated currency

They get everyone playing it, including Joe Homeowner. Saving is no fun. Nobody likes to save. And they know that the gubmint, the biggest debtor of all, will inevitably, always depreciate the currency. So it is foolhardy to save and nobody does it except through pension schemes and insurance and other forms of mandated capital pools.

This cycle is going to repeat because there is unlimited ability to print money and there is widespread public participation in the game. That is the essence of democracy. In Weimar it was the industrialists and up-in-comers who played this game. The Weimar hyperinflation was purposefully created and the blame was affixed wrongly onto the peace treaties and reparations.

This time around, the blame is affixed on greed. Demogoguery would be greater but the public is more sophisticated now and notices that those greedy banksters are in power. During FDR's time they read the mainstream papers and didn't pick up on this, stupidly.

People have been long hooked on the above game. In the end, Joe Homeowner doesn't come out ahead because he doesn't exit in time. But he wants to try again. Because his credit card debts are oh so high and he is losing his job and has no savings to worry about.

There MUST be another inflation of some kind because Americans won't tolerate things without it. And the gubmint already has committed to it.

Deflation has never happened in a fiat regime. Technically you might have a month or two, but it is complete BS.

What does happen is that assets lose value, but the loans against those assets remain. The future ability of the banking system to inflate, to create more money, diminishes.

But if you notice, the reserves are there now and the banks can lend like crazy if they want to. There is unlimited ability for banks to lend more money into existence. And the ultimate borrower, the US gubmint, will either borrow directly from the banks, thus creating this money, or else, the gubmint will guarantee private sector loans.

I think people complicate this a bit talking about other methods of creating currency depreciation. The fundamental way is the simplest and it is going on right now.

This is not deflationary because no real money is disappearing. In the early 1930s, money disappeared because banks went under.

I have said before that defaults do NOT create deflation. The money that was borrowed is already in the economy, little amoebas spreading around. But the one default that creates deflation is a default of a bank because that does in fact destroy money and is deflationary.

But banks are no longer allowed to default. The only defaults are by borrowers, and these are not deflationary, only (temporarily) dis-inflationary.

So people in the Administration and the Federal Reserver, such as Mr. Summers and Mr. Bernanke, are either completely stupid, brainwashed, or is just propagandizing. Probably all three. He is a bright man with a terrible agenda.

 

 

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