Yesterday we offered yet another installment of our running dialogue with iTulip founder Eric Janszen concerning whether hyperinflation or deflation is more likely to destroy the U.S economy. We hesitate to call it a debate because we've never thought those in the inflationist camp have a leg to stand on. We'll believe hyperinflation is possible when the appraised value of homes in our neighborhood hit the billion dollar mark and wages rise commensurately. Below is the concluding portion of our most recent back-and-forth with Eric. He begins with the fantastic notion that the 'adjustments' taking place in the economy right now are likely to continue for years. We strongly disagree and see a cataclysm ahead. Eric: This will go on and on for years and years as living standards decline. Inflation is easier for people to adjust to than you'd think, certainly easier than 25% unemployment and no money around to buy anything as was the policy choice in the 1930s as wealth holders pressured the State to stick to the gold standard which tied the Fed's hands to create inflation. As soon as the US went off the gold standard in 1933 and gold was re-priced, an instantaneous spike in inflation from -10% (deflation) to +15% (inflation) resulted. And that after thousands of banks failed and the banking system had basically cratered. Those who hold fast to the theory that we are going to see commodity and wage price deflation as an outcome of this credit bubble don't seem to understand this part of the history of the last US credit bubble. A Bubble Like No Other Rick: History, like statistics, is more often than not a damnable lie, and it is a brazen intellectual lie to suggest that there has ever been a credit bubble even remotely like
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