For deflationists, Financial Sense interviewed one of the best in that camp this weekend.
By Daniel at 8 September, 2009, 9:32 am
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http://www.financialsense.com/fsn/main.html
(Bob Prechter 3rd hour)
When you listen to him, you say, how could we have inflation? It is what he doesn’t cover that, I believe, is the issue.
It is not all the internal U.S. things going on that will cause it. It is what the world does with the dollar and whether or not the 2 billion middle class consumers (buying power, not standard of living) are taking part in a global recovery or not.
While I am in the “inflation camp,” I do believe our asset prices will continue to fall and that inflation will not be an issue if the global recovery turns out to be an illusion.
Also, as you know, I call for a dollar collapse at some point but, that too, is based on a global recovery taking place without the U.S. The timing is anything from months to years because if the global recovery is not happening now, then the dollar could rally and stay up for years until the global recovery does take place without us.
What makes me think it will be without us, is our debt and more than just debt, interest on debt. The rollovers into bills and notes from bonds has greatly reduced our interest on debt but, any showing of strength could see moves from less that 1% back to over 3.5% or even 4% bonds. That would quadruple interest on debt and make that part of the budget, alone, more than we take in from corporate and individual tax receipts.
In other words, no matter what we do, it will hurt our nation’s ability to get a handle on debt and actually grow the economy. If we start raising taxes, it will just hurt employment even more and actually lower tax receipts even if there is a temporary jump in them first. If you cut spending, with one in four jobs tied either directly or indirectly to government spending, you hurt employment too.
We can’t tax or grow out of this even if we are successful in delaying a collapse for years.
JanPaul
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