Re: Is deflation or inflation next? Opine, please.

On 28 May 2006 10:07:49 -0700, taxationistheft2003@xxxxxxxxx wrote:

Will the world see deflation or inflation? I think because of the high
levels of debt, we will see deflation, once the housing bubble pops.

I would also bet on deflation, the only question is when. Other
countries, especially China, won't be stupid enough to accept US
toilet paper in return for real goods and services indefinitely. When
the huge overhang of US government debt held by other countries starts
being repatriated, real US interest rates will rise, and credit money
creation will be choked off. Debt repayments and mortgage defaults
will then sharply contract the money supply. This is a fatal flaw in
the credit money system: you can't force people to borrow when you
need to increase the money supply to prevent deflation. Before the
end of the year is quite possible, IMO, but it could also wait a
couple of years yet. China is the key. It does not want anything to
happen before the 2008 Olympics, so might wait until they are over
before pulling the plug, content to let the imbalance grow even more
dangerous in the meantime. So fall 2008 is effectively the expiry
date on the current world financial system (it is also the time of a
very important US election, which China might want to influence by
triggering a US financial crisis). You read it here first.

Would the more learned among you please post your opinion? I think
this is the most important question in the world today.

Yes, it's very important; but it is only an indirect side effect of
the real issue, which is land.

-- Roy L
.

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