fischer_76 wrote:
> and BTW helicoptor ben has already said he will not allow
> deflation - meaning he is going to print money faster than barack
> can spend it
This is a debate we've been having since this forum started over two
years ago. Here are two forum threads you may wish to read through:
** Inflation, deflation, gold and currencies
**
http://generationaldynamics.com/forum/v ... f=14&t=442
** Financial topics
**
http://generationaldynamics.com/forum/v ... p?f=14&t=2
With regard to helicopter Ben, I'm reminded of the old joke about the
guy who says, "I used to have six theories about raising children.
Now I have six children and no theories."
Bernanke used to believe that the Great Depression could have been
avoided simply by lowering interest rates. Bernanke used to believe
that "deflation is impossible with a 'fiat' currency, because the
central bank can simply print more money, preventing deflation."
Both of these theories have been completely disproven by the
experience of Japan since their 1990s stock market crash. Low
interest rates, stimulus, bailouts, quantitative easing have all
failed to stop inflation. Japan's CPI has fallen each month for last
18 months.
This is actually a big surprise to me, because I would have thought
that after 20 years, deflation would have ended just in the normal
course of events, even without printing money. But what seems to be
the case is that all the stimulus and bailouts have done is POSTPONE
the inevitable, and the worst is yet to come for Japan -- and for the
rest of the world.
The problem is that the Fed can't print money fast enough to replace
the money that's being destroyed through deleveraging. All that money
that was created through debt the the credit bubble is being
destroyed, and the amount of money being inserted into the economy is
less than the amount being destroyed, so deflation occurs.
John