Inflation v Deflation – Reality Check

Posted by Martin Armstrong - Armstrong Economics

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Just remember, guess wrong, and you may be totally unprepared for we cannot stop this crisis – Martin Armstrong 30/04/13

QUESTION: I read your metals report. This is really a great read. It is deflation that destroys empires by sucking in all assets like a black hole eats star systems. I am correct?

ANSWER: Yes! The hyperinflationists only look at Germany and Zimbabwe and assume if you print enough money that is where you go. What they fail to grasp is that they had no debt markets nor were they the reserve currency with worldwide demand. Germany was a brand new revolutionary government that was inviting the Russian communists to come take Germany. Who would buy their debt under such conditions? Capital withdrew even from the banks, so there was no cash or “real” money to be found. That stands in stark contrast to our position where we have a $17 trillion debt outstanding, $11 trillion in international central bank reserves (primarily debt starting to diversify into stock), with no alternative anywhere in sight since Europe is incapable of offering a national debt product, and who wants Japan?

The dollar is the ONLY game in town for now. Consequently, 40% of the interest is exported and it does not stimulate the domestic economy – non-inflationary. Then we have government aggressively raising taxes and where is much of that money going? Either overseas to service the debt or to government expense. We are sucking the lifeblood of the economy from our veins like a vampire and consuming it by the rising cost of government and exporting what they do not burn up.

….read more of this analysis of the current state of Inflation/Deflation HERE