Message:

<p>[QUOTE=&quot;Cloudsweeper99, post: 1101099, member: 3011&quot;]Regarding debt, people focus on what the Fed is doing and don&#039;t factor in the repayments and defaults on other forms of debt.&nbsp; When you do this, the case for inflation disappears [for now] because there isn&#039;t much of a net debt increase.</p><p><br /></p><p>Default can never be taken off the table.&nbsp; Historically, this is the way nations have solved debt crises and eventually the US could be forced to do the same.&nbsp; The whole concept of &quot;this can never happen here because it&#039;s different this time&quot; may turn out to be deeply flawed.&nbsp; Time will tell.</p><p><br /></p><p>M1 is rising, but velocity has dropped significantly since QE. <a href="http://research.stlouisfed.org/fred2/series/M1V?cid=32242" target="_blank" class="externalLink ProxyLink" data-proxy-href="http://research.stlouisfed.org/fred2/series/M1V?cid=32242" rel="nofollow">http://research.stlouisfed.org/fred2/series/M1V?cid=32242</a></p><p><br /></p><p>Bond yields are up a bit but still below historical norms, so this looks more like a reversion to the mean than fear of inflation.&nbsp; Real rates would not be so close to zero if the market feared inflation.&nbsp; It could also mean rising fear of default.</p><p><br /></p><p>The fall in housing prices has also been a significant deflationary force.&nbsp; I&#039;ve read that 30% of mortgages are underwater now, so expect significant additional defaults - another deflationary force.</p><p><br /></p><p>If the Fed is determined to monetize to infinity, of course they could cause hyperinflation.&nbsp; But right now it looks more like they are trying to replace the money lost from defaults and liquidations in the financial system to fend off deflation.&nbsp; Also keep in mind that rapidly rising interest rates will crash the long term bond market, which is very deflationary.&nbsp; </p><p><br /></p><p>So I come down to a 50/50 chance of inflation or deflation because there could very well be inflation, as you point out.&nbsp; I just think that people think it&#039;s a sure thing, and that&#039;s how mistakes are made.&nbsp; Nothing happening right now will cause hyperinflation.&nbsp; I fully agree that the Fed might take action at some point that will cause significant inflation, but it hasn&#039;t happened yet.[/QUOTE]</p><p><br /></p>

Your name or email address:

Do you already have an account?

• No, create an account now.
• Yes, my password is:
• Forgot your password?

Stay logged in