“Deflation or inflation, what is it going to be?”

This is the $64,000 question.

There is no question that we are currently experiencing asset price deflation and economic slowing.

But the longer-term expectation is that Bernanke’s assertion – an assertion now backed up by action – that the government can and will print new money to any extent needed is the more important force. Since inflation is a monetary condition, if the FED wants inflation, they CAN create it!

This is of great importance because, unlike in the 1930s, there is no limitation on what the government can do, because there is no gold standard to enforce monetary discipline. Instead, the world will be afloat on a sea of massive new government spending and credit facilities. After a lag, the stimulus will perform the expected actions of reinstating credit and debasing the currency. But never lose sight of the fact that the government is creating money out of thin air.

My guess of what will happen over the next few years is that we will have an inflationary depression. This is, of course, the best of all possible situations.

Related Posts:

• The reason why GDP is shown growing although no one benefits is pretty clear.
• Maybe 1/20 Americans could even explain inflation to someone else.
• Most people DO NOT understand stimulus money:
• How bad, in theory, could this really be?
• The consequences of printing unlimited number of fiat money

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