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| No, supply is only part of the equation. It has become very clear recently how only focussing on supply can lead to the wrong conclusion. If demand increases more than supply, it doesn't matter how much supply has been increased. In times like these, uncertainty makes people want to hold whatever it might be that seems like it will be some protection against the uncertainty. Now, US dollars are in demand worldwide due to this increasing uncertainty. This has made everyone of the experts who have been calling for an immediate fall in the value of the dollar wrong. Also, we have read repeatedly right here on this forum how the dollar *has to* lose reserve currency status - and instead it has gone into a roaring bull market. This indicates that demand has increased more than supply. We can have this huge increase in supply of dollars, but if demand is stronger and the dollars are hoarded (because of fear), we will see deflation. We can see a huge increase in supply, but if those dollars end up in on the balance sheets of the very wealthy, how can there be inflation - other than in the things the wealthy want to buy - like stocks and bonds?
"A deleveraging must eventually occur" - I don't disagree with this at all. "Eventually" might be the key word, however. Or, it might be when the extreme wealthy own almost everything and the rest of us are renters - and there is no opportunity - and there is a revolution. Or, maybe, since the wealthy pay the police and military, they can use them to keep the rest of us "in our place". Who knows?
As for two eventual outcomes - why not one followed by the other? Or, maybe more likely, a long protracted period where we *finally* get to that "eventual" point? One thing we can be sure of - it is a chaotic system, and whatever happens, it will probably be a surprise to most of us. | |
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John - inflation/deflation - probably one after the other
