Inflation vs. Deflation: Mike Shedlock vs. Marc Faber
This is a good video, short and sweet describing the main arguments between inflation and deflation. While Marc "Dr. Doom" Faber deserves all the respect in the world, he unfortunately misses the mark here, at least partially. Mike Shedlock however delivers a succinct argument as to why the credit expansion strategy of the Central Bank will inevitably fail.
Where both men are completely right is that the current policy being pursued by our government is one of utter disaster and Marc Faber even goes so far as to say these policies will bring down the Western governments. Well, they don't call him Dr. Doom for nothing, but sadly he may be on to something. One of the hallmarks of the Great Depression was it's unbearable length and duration, this is of course purely and completely due to massive government stimulus, currency devaluation and choking taxation.
Both Mike Shedlock and Marc Faber are sensing that the approach over the last two years has been eerily similar to that of the 1930s. While government agencies and departments have not grown at such a dramatic rate, the amount of borrowing and consumption currently being performed by the Federal and State governments is truly staggering. This is the legacy of Keynesianism and it is a sad legacy indeed.
Faber makes another interesting point and that is deflation is a characteristic of a strong economy, while inflation is the essence of a weak economy. He is absolutely correct and it is most certainly a subject most people get wrong, however a contraction after a massive bubble is nothing more than an economy purging itself of excess. Contraction in this particular case is synonymous with deflation, so while this is not exactly the deflation that asserts itself with productivity and efficiency it is still a much welcomed force. So while a deflation in our case is only the path to recovery and not the recovery just yet, it does not in any way invalidate Faber's underlying point.
Ultimately it is all about credit entering the system and currently there is no way this will happen. Primary floodgates of inflation are the commercial banking institutions and unless they find worthy and reasonable sources of investments they will continue to sit on Bernanke's funny money for eternity. That is, until Bernanke gets tired of it and reigns the money back as he realizes that thirty years of Ponzi finance bubbles have come to an end.
Where both men are completely right is that the current policy being pursued by our government is one of utter disaster and Marc Faber even goes so far as to say these policies will bring down the Western governments. Well, they don't call him Dr. Doom for nothing, but sadly he may be on to something. One of the hallmarks of the Great Depression was it's unbearable length and duration, this is of course purely and completely due to massive government stimulus, currency devaluation and choking taxation.
Both Mike Shedlock and Marc Faber are sensing that the approach over the last two years has been eerily similar to that of the 1930s. While government agencies and departments have not grown at such a dramatic rate, the amount of borrowing and consumption currently being performed by the Federal and State governments is truly staggering. This is the legacy of Keynesianism and it is a sad legacy indeed.
Faber makes another interesting point and that is deflation is a characteristic of a strong economy, while inflation is the essence of a weak economy. He is absolutely correct and it is most certainly a subject most people get wrong, however a contraction after a massive bubble is nothing more than an economy purging itself of excess. Contraction in this particular case is synonymous with deflation, so while this is not exactly the deflation that asserts itself with productivity and efficiency it is still a much welcomed force. So while a deflation in our case is only the path to recovery and not the recovery just yet, it does not in any way invalidate Faber's underlying point.
Ultimately it is all about credit entering the system and currently there is no way this will happen. Primary floodgates of inflation are the commercial banking institutions and unless they find worthy and reasonable sources of investments they will continue to sit on Bernanke's funny money for eternity. That is, until Bernanke gets tired of it and reigns the money back as he realizes that thirty years of Ponzi finance bubbles have come to an end.
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