|
Napanee, Ontario | I did read both articles haha
Krugman also likes to use the "confidence" and "Currency backed by guy with big guns" argument.
Well Rome also had the biggest guns, and as Martin states, had much confidence in it's currency for a while too. The problem with those arguments is that they are ephemeral conditions. Guns are great until you can't pay for them.
Confidence is great until it's gone. And it typically vanishes overnight. The longer they print, in the ECB, BoJ, BoE, FED - the more pressure they are putting on people to uphold that confidence. It will not remain forever, there is a finite end to that. Sure, Armstrong is correct that there is more confidence in the dollar RIGHT NOW, due to other economies being more weak than the US. But this is a global economy, with global banking connectivity vis. a vis the derivative, LIBOR, central bank swap market, among many others. Confidence, and resulting value, of the EU, Japan, or other countries' markets cannot collapse independently while the North American market, and banking system, remain solvent.
With regard to deflation, inflation chronology.... there are several people I follow that agree with this also. And in fact, I would submit that that central planners need SOME element of deflation as justification of the continuation of their policies. So, I would agree with that theory in PART. The question is How much / far will they let it go?
If you look back through the last 7 years - in 2008/ 2009, it was the first go around. The Fed waited for the whites in everyones eyes before finally 'giving in' and announcing the trillion some dollar bailout in march 2009. The system was just about ready to disintegrate at that point, because of vanishing "Confidence". They will not let it get that far gone again, and as you can see from their record of QE 2, operation twist, QE3... they have allowed for less and less correction each time before implementing the next round of liquidity.
So yes, deflation, then inflation... but just how much deflation is accepted First before intervention, which of course leads to the eventual inflation.
Edited by OldMcdonald 1/30/2015 13:07
| |
|
John - inflation/deflation - probably one after the other
