Killer Deflation Eludes Monetarist North


In the Inflation vs. Deflation debate, Gary North has come up with this grabber-of-a- headline: “If Deflation Is Coming, Sell Your Gold,” he writes at If North is trying to scare deflationists into abandoning their arguments, giving banner play to such bad advice should only make them snicker and hoot. For in fact, deflation is already here in spades, in the form of a financial implosion that has wiped at least $80 trillion dollars worth of “wealth” from the world’s books. And in the midst of this, of course, gold has performed superbly for investors.


North would ignore these facts to argue that no deflation has occurred, technically speaking. He points out that the money supply in the form of excess bank reserves has actually doubled recently, as indeed it has. But the supposed robustness of M1, M2 and M3 will be scant consolation to investors who have seen their net worth evaporate by 30% to 50% or more in the last year or so. It will also not cheer the hundreds of millions of homeowners and investors who are getting crushed by the main symptom of the deflation that North says does not exist – i.e., an increase in the real burden of debt.

A Helicopter Ben Believer

North’s arguments represent monetarism’s last stand. A True Believer in the inflationist creed of Helicopter Ben, he is one of those guys who has been arguing for decades that, if deflation were to threaten, They would not let it happen. In fact, deflation has not only happened, it has completely overwhelmed the central banks’ collective ability to pump even a dime’s worth of inflation into the real estate market, or to stimulate a mere ripple of new borrowing. We always thought North was smarter than the “They-would-never-let-it-happen” crowd, but apparently not. It would appear that he is just another die-hard monetarist who sees the world through economic blinders. As such, he has been unable to fathom that, for a few brief years, just about any type of asset that could generate a stream of income, or appear to appreciate in value, was a fungible source of new money.

North seems all but certain that a monetary expansion lies ahead, a consequence of the Fed’s new policy of paying interest (of 0.1%) on reserves that it holds from banks. “The banks are losing money hand over fist,” he notes, “because they have to pay depositors a rate of interest, and they are not lending the money at the FED at a higher rate of interest. So, they cannot make any profit on the difference between the interest rate to the borrower and the interest rate to the depositor.”North does not acknowledge that the banks might prefer to lose a little bit on the spread in order to keep their money “safe,” rather than lend it for whatever purposes. (And it is only a relative pittance in opportunity cost that will be lost, since, as readers will have noticed, the banks are not exactly paying generous returns on customer deposits right now.)

New, Improved Bank Failures?

North is similarly unpersuasive when he asserts that banks are no longer allowed to fail in a way that removes money from the system, as occurred during the 1930s. The money is simply moved to another bank, he notes. We say, what money? Merge Citi with another bank and you have not preserved anything of value; rather, you have saddled the new owner with liabilities that are hundreds of times as large as whatever assets Citi is said to have passed on.

We’ll go a step further and reject the implication that U.S. money itself is an asset; in reality, and as North must know, the money in the banks comprises worthless IOUs – Federal Reserve Notes printed by the U.S. Treasury. Moreover, this digital money might just as well have been erased from the Fed’s hard drive, for all the success it has achieved in promoting inflation. North is the first guy we’d have expected to acknowledge that the banks in which the money supply supposedly resides are themselves hollow shells. To say that these banks have not been allowed to fail is to ignore the fact that they already have failed. Their imminent nationalization might fool North’s followers into believing the banks’ assets had been preserved, but by whom? A bankrupt U.S. Government?

Lend to Whom, and for What?

An even bigger hole in North’s argument is the notion that banks will have to start lending when a recovery begins. To whom, we would ask? And for what purpose? And on what collateral? These are crucial concerns, and it is dumbfounding that so astute an observer as North has evidently failed to consider them. Even the mainstream press has belatedly caught onto the fact that the mere availability of credit does not necessarily create eager borrowers. People need to believe they can get rich by borrowing rather than by saving in order for money velocity to multiply banking reserves significantly. But North, for whatever reason, has not even mentioned money velocity in his essay.

He issues this challenge: “If somebody is predicting serious price deflation or serious price inflation, make that person answer this question: ‘Under your scenario, what is the relationship among the monetary base, the money supply, and prices?’ Our answer is, Who cares? As long as the implosion of debt continues to suffocate the global economy, and to crush borrowers, we are experiencing deflation. End of argument. “Then ask this,” North continues: “When the banks pull their money out of the FED when the economy revives or else they are going bust because of interest paid to depositors, and when that money gets to the general public, what will be the result: price inflation or price deflation? Make certain that these are the two issues that the person who predicts either serious price inflation or serious price deflation deals with in print. If you don’t understand his answer, you can be pretty sure that he doesn’t, either.”

Devious Logic

Here’s a simple answer: The economy isn’t going to revive – at least, not sufficiently to trigger inflation beyond the grocery store. North is being devious when he says that money pulled out of the Fed will somehow “get” to the general public. In fact, it will only “get” to the public in such quantities as individuals are eager to borrow. The grim reality is that it could be another 50 years before the public is so very eager to borrow as it was when all the borrowing in the world barely sustained 3% GDP growth.

North, always one of our favorite pessimists, appears to have abandoned his dark view of the economy to stand logic on its head. Forget about inflation, Gary. The Second Great Depression is upon us, and it threatens to become even deeper and more prolonged than the first. Under the circumstances, the banks are not likely to experience a surge in the demand for credit, other than from businesses and borrowers about to drop dead without it. Are we to believe that such borrowing could possibly trigger off inflation? North might, since he ends his essay by offering the following bet: “What I am saying is this: prices are more likely to rise by 10% or more for three consecutive years than fall by 5% for three consecutive years. I will up the ante. They are more likely to rise by 20% than fall by 5% for three consecutive years.”

A Losing Bet

By our reckoning, he has already lost this bet, since our price index comprises just one item: real estate. North take pains to explain why no price index, let alone one that tracks only home prices, can hope to provide a true picture of inflation or deflation. We’ll concede the point about inflation indexes in general, but we believe nonetheless that a housing price index is as useful and informative as we could ask for at present, since it is an absolutely crucial component of the bottom line for so many of America’s 80 million homeowners.

North argues that falling home prices do not create deflation, nor rising home prices inflation, simply because neither causes the money supply to change. But consider this: Until a couple of years ago, rising home prices were inarguably a mainstay of money supply growth, allowing homeowners to harvest spendable cash that might just as well have come from trees in their back yards. And now, although the collapse of home prices may not have diminished bank reserves, it has all but extinguished the desire of borrowers to multiply those reserves into quantities that would be inflationary. Monetarists can continue to ignore this, insisting that inflation/deflation is simply an increase/decrease in the money supply, but this is just academic poppycock that is blind to what is going on in our economic lives. If it walks like deflation, and quacks like deflation, it is deflation.

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Comments on this entry are closed.

Peter Ritter February 8, 2009, 11:35 am

Having looked around regarding this important inflation-deflation question, the story now appears like this to me:
What we have is not deflation, because general price levels are not declining. Besides, the monetary base has not gone down but up.

What about the destruction of capital in real estate, stock markets and elsewhere? That cannot be properly termed a deflation but rather a correction or popping of several bubbles; No. 1 in real estate, followed by other investment areas.
Once the air is out of these bubbles, the damage caused by this debacle will surely cause or deepen depression, but at that time inflation from all the printed money will start to bite. That should happen this year or next at the latest.
Therefore, the correct investment strategy will not fear deflation but prepare for inflation, by buying gold and silver now up to the eyeballs, as long as that can be had so cheaply with today’s ridiculously overvalued Mickey Mouse dollar.
The opposite strategy would be to prepare for deflation, in which case one would have to hoard cash in anticipation of everything getting ever cheaper. That just doesn’t sound right, and I for one will keep moving as much as possible into physical precious metals.

Peter Ritter February 5, 2009, 10:47 pm

Grocery demand does not change drastically unless there is a huge influx of people, which wasn’t the case. The price of corn, i.e. animals feeds, has come drastically down. Feeding the cows has become cheaper. Transporting milk and meat to market has become much cheaper. And all this on top of deflation!
In this light, the question where grocery price increases come from remains valid.

Peter Ritter February 4, 2009, 3:58 am

Rick. If we have deflation, why do we have inflation at the grocery store? In a true deflation, all prices should go down, with the dollar appreciating, enabling you to buy ever more as long as deflation lasts.
Fuel/transportation prices have come down, as well as grain prices and metal prices. Costs must be lower for most producers. So where the heck is grocery price inflation coming from? There seems to be a fly in the ointment of deflation theory. Can we clear that up?

Rick Ackerman February 5, 2009, 11:08 am

Groceries are in far greater demand than anything else. Unlike financial assets, milk and meat cannot be created from thin air. But the vastly larger picture is of deflation.

Shane February 3, 2009, 4:59 am

Well, I can only really have an opinion on this because I have been living in Japan for 15 years. I am not trained as an economist, certainly.

When we talk about Deflation/Hyperinflation, it seems a lot of people are lumping them on either side of the see-saw so they balance out. Ie: Either 10000% a year inflation or an utter deflationary spiral to our doom.

Well, I think the world is in for Japan Mark 2. Edward above called Iceland the canary in the coalmine. I think Japan is a bigger and earlier one, pointing to something different.

I can attest that property values dropped hard and fast, along with the Nikkei. I’m sure you can find the charts yourself.

When people go underwater on their mortgage, some of them tread water and keep paying, and some of them drown.

Either way, someone who no longer has equity in their house or someone who has just dumped their house by “jingle mail” won’t be going to the mall.

After the first crash in property values and stocks, we no longer NEED huge deflation to have a deflationary economy. -.1% a year is enough! A can of coke here went from 120 yen, to 100 yen and is now back at 120 yen, same as 15 years ago. Even mild deflation puts people in the position of reducing debt and saving.

All those stock market losses don’t go away, they remain burned into the brains of the people who lost them. People are worried about their jobs and they aren’t going to spend.

So how can we have hyperinflation? Yeah, I think he DOW has a long way to go down actually. Every time it starts getting anywhere NEAR a good price, all those retirees coming towards retirement are going to sell, sell, sell just to lock it in.

JIMB February 3, 2009, 10:37 am

Rick Ackerman – Inflation in food prices points to exactly the issue. The Fed propping up prices (even if they fall in absolute terms) of all sorts of non-essential items will cause some non-storable consumption items to rise. Which ones, we aren’t sure, but if it’s food, then that to me is inflation.

Here’s an example that may make this more clear. Citi Pyramid Building Enterprises finds that the pyramid building business has collapsed. That is called “deflation” by many authorities. Meanwhile, grain prices have increased because Citi pulled all the laborers out of producing grain and building pyramids. Is that deflation or inflation?

I say it’s inflation (food) … you say it’s deflation (pyramids). There’s a disconnect here because the discussion is too aggregative and focused on the results (prices) rather than the cause (change in par value spendable funds).

I think the real question is, how much has the “money supply” shrunk? So far it hasn’t (deposits plus cash held by the public: spendable funds). If that does go down, then you are right. It is deflation.

Rick Ackerman February 4, 2009, 1:48 am

Just do the math. How significant is a grocery bill that is even $2,000 higher than last year’s if your $300,000 house has lost 30% of its value?

JIMB February 3, 2009, 10:28 am

Peter – In my view “velocity” arguments are the exact argument for the bailout status quo. Officials want an excuse to expand cash and they will do so by giving cash to favored groups that individuals would not give funds.

The economy would restructure rapidly if the government did little except to guarantee transaction deposits at 100% of par. Producers would simply drain all non producers of funds, quickly and immediately all the incompetent financial managers would vanish.

I also disagree that “Printing all the money in the world” won’t create inflation … Imagine your income going up by 5000% (provided it is average right now) and you having to do 1/2 the work. Would you spend on different items? I bet the first thing you’d do is pay off your house (which would replace bank debt / deposits with the new cash) and the second thing you’d do is buy that plot of land you wanted in Utah far away from the city (just in case…), the third is perhaps buy college education for your kids (prepaid to avoid price increases), etc. Whatever it is, more cash will alter your behavior. It would alter the behavior of everyone else as well. To say otherwise is to deny the laws of supply and demand.

But the authorities won’t do such a thing. They want Joe sixpack to get the money last thereby pushing the future devaluation onto him.

Rick Ackerman February 4, 2009, 1:53 am

So far, all the money in the world hasn’t produced any “beneficial” inflation of the housing kind. Concerning a 5000% increase in wages, this happened in Weimar because the German hyperinflation was propagated specifically to head off devastating levels of unemployment. But here? It can only happen if the Guvvvamint starts delivering huge bundles of printing press money to employers. There is no sign we are even close to that, and by the time such an extreme measure is attempted, unemployment will already be at 20% or higher.

Peter Ritter February 3, 2009, 2:28 am

JIMB, if it is good enough for you that they stop expanding credit, you are very modest. For me its not good enough by far. I want these bankster SOB’s out of my life. They or anybody else should have no means of influencing our economy, our lives to the degree that the world is becoming the banksters’ plantation. To that end a Truth Commission should document what really happened in the last 100 years. Those guilty of crimes against mankind and still alive today should be tried under laws that are guided by the common good, not that of the banksters. Then their assets should be seized and put to good use. The banksters should count themselves very lucky if they get away with their bare lives. That would be something new, in the magnitude of biblical good winning over evil.
As to velocity of money, printing all the money in the world will produce zero inflation if that money sits in accounts and vaults and remains unspent. Inflation is only produced when the money comes into circulation, therefore velocity cannot just be shunted aside. Money x velocity = GDP.
In the meantime we may not have deflation as Ed convincingly argues above. So what can we call this depressionary phase we are in now which doesn’t display the normal characteristics of a deflationary ecomomy?
Runup to hyper inflation? Maybe, if that hyper inflation ever actually takes place, and right now that is not (yet?) the case.
Stagflation? Maybe, because we have stagnation caused by the disappearance of credit, plus we have some price inflation.
Something new? Probably, because all these government/bankster interventions into markets have turned the world upside down. We have never seen the set of circumstances prevailing today, where a small minority of criminal bankster types are in their endgame of subjugating the world. Purely economic aspects seem insufficient to paint the whole picture.

Citizen AllenM February 2, 2009, 5:32 pm

You are only looking at one half of the equation- there is this hard money fixation left over from Friedman that infects even this discussion.

$2-4 Trillion of FISCAL stimulus is on the way in just this year. Wait until next year for your eyes to fly out in shock and amazement!

That is what is coming, as more collapses due to imploding financial shadow banking system become apparent. Gee, a bad bank- how about a bad entire financial sector!

Now, what does this mean? Stuff you don’t need: New porsches, expensive trips to Paris, large municipal bond investments, Wall Street shiny bauble investments. Collectible plates from Franklin Mint.

Stuff you need: Food, energy, and anything you absolutely have to have to survive day to day- much more expensive. Eventually even houses will become more expensive as the vacant oversupply is stripped and burned, or damaged beyond simple repair. Now is this a classic inflation where you have full employment and shortage driving prices higher- only if it is 1967!

This is the 70s show on steriods. We just passed 1974 at warp speed.
Now we have the truth about the fiat nature of the dollar once again undermining confidence in the long term stability of our currency. How about a war in the Middle East next? Not a couple of bombs and assorted random missles, but a real knockdown draggem out?

Gee, do you think gold and silver will do well in this environment?
Of course!
Wonderful, and a bunch

Rick Ackerman February 2, 2009, 5:16 pm

Some interesting notes from David Rosenberg, the Merrill economist who, unlike nearly all of his colleagues, has been getting it right:

“Not a recession but a depression — We get into the details of the first-quarter GDP report below, but the chart below says it all for those that doubt that this is not a recession, but indeed a depression: As the long-run chart below vividly illustrates, nominal consumer spending does not plummet at a 9% annual rate in a typical post-WWII gardenvariety recession. That is, however, exactly what happened last quarter.

“Deflation risks will trump inflation risks — Yes, yes, everyone seems to believe that sky-high fiscal deficits suggest that Treasury yields have nowhere to go to but up: Wrong. We believe as long as the private sector is shrinking its balance sheet and the economy is operating below full capacity, deflation risks will trump inflation risks, and the void created by the debt paydown in the household and business sectors will leave ample room to absorb the largesse at the federal government level. As a real life example, the fiscal deficit exploded to $833 billion in 2008 from $188 bln in 2007, and yet, miraculously, the 10-year note yield fell to 3.7% from 4.6%. Go back to 2002, and we see that there was a deficit of $232 billion, a huge swing from a $92 billion surplus in 2002 and a $255 billion surplus in 2000. What did the yield on the 10-year T-note average in 2002? How about 4.61% (and 4% the following year when the budget deficit surged to $395 bln). And in 2001 it was 5% and in 2000 the average yield was 6%. So those who believe that fiscal deficits are the only ingredient in the equation that determines the direction of bond yields, well, we would have to say that they are …. mistaken.’

Rick Ackerman February 2, 2009, 5:14 pm

Rich, you seem to know quite a bit about North. I can attest that he went over the edge on Y2K preparations, since, at the time, I was reporting on Y2K preparedness in the U.S. for a research company that sold the information to institutional investors. Like North, I tend to see the glass as half-full — of hemlock — but my thousands of sources across a broad spectrum of U.S. industries convinced me that Y2K was going to be a bust. North, for his part, moved to a property that had its own sources of water and (if memory serves) natural gas. He had back-up generators up the wazoo. He also promoted immune-system boosters when the first stories about bird flu came out. He’s a little crazy –as who is not? — but he is also one of the very best writers and polemicists that I have come across. Everything that he writes is interesting, and he really does have his subscribers’ best interests at heart.

Edward February 2, 2009, 5:07 pm

Semantic arguments or real differences?

Deflation would mean across the board drops in prices and an increasing value of the US dollar. Groceries and other necessities are still rising in this economy.

Are housing price drops true deflation? I don’t think so because housing was in a bubble with oversupply. Supply has overwhelmed demand. Demand fell apart like in all manias.

Hyperinflation in foreign countries is really judged by one set of circumstances: Is there a continuous growth in the paper money supply in circulation, causing higher prices in goods and services, particularly necessity goods? All hyperinflating economies are already basket cases. A breakdown of industry and the general economy is always a lead up to hyperinflation.

Inversely, deflation should be estimated by declining paper money, with general decline of prices with the maintenance of the strength of the paper currency. The US dollar continues generally to be in a large downtrend contradicting deflation theory. Gold is generally in an uptrend contradicting the deflationists. A deflationary economy should see a bottoming and then strengthening dollar as debt is destroyed from the system. This is clearly not what is happening in the US.

For theses reasons, I think we are in the prodrome (depressionary developments) of a hyperinflation. Then the government is forced to either increase the welfare state or take on increased social disorder. The larger welfare state goes into hyperinflation and eventually leads to social disorder anyway. The bailouts are increases in the welfare state, but direct infusions to the public will have to follow.

After hyperinflation then real deflation sets in because debt is destroyed, government gives up (we hope) on expansion of the welfare state, and the currency in circulation rises in response. The circulating currency will rise faster if citizens can exchange irredeemable pieces of paper for gold and silver. Paper currency rises faster if monetary metals become official, putting a ceiling on government spending.

That’s my take anyway. Ed

Rick Ackerman February 2, 2009, 5:05 pm

Thanks for these interesting note on money velocity. If you think of velocity as “liquidity preference” — the preference of individuals to hold cash rather than spend it — the meaning of the term becomes clearer. When liquidity preference is high — at times such as now — it means that people are hoarding cash for any number of reasons, most particularly a fear of what the future may bring.

Rich February 2, 2009, 12:14 pm

Academic quasi monetarists like Bernanke, Friedman, Keynesian and North believe(d) inflation is strictly a function of money supply, velocity notwithstanding. And in the 20 year inflationary spending phase of the Jubilee K-Wave they were often right. But in the 10 year plateau phase and 20 year deflationary saving phase, they push on a string with less and less demand.
This is why scriptural texts from time immemorial warned about debt and usury. Too bad North, a Calvinist Christian Reconstructionist like his father-in-law Rushdoony, with a PhD in economic history (The Concept of Property in Puritan New England), a minor role in government and former Howard Ruff associate, wedded to his word processor, advocating public execution for abortion counselors and the people who have them, his stoning theocracy closer to the Taliban than GOP, does not understand markets or Austrian Economics, even though he writes incessantly about both. Otherwise, he might not have been a bond and stock bear recommending gold and silver from 1980 on, predicting rationed housing, AIDs closing all hospitals, nuclear war with the Soviets, nor fallen for the Y2K boondoggle that left his subscribers and Coast to Coast insomniacs with unpalatable survival food.

Peter Ritter February 2, 2009, 11:48 am

As good as Mises was in many things economic, “mysterious” money velocity was not his forte.
A simple and basic analysis of money velocity will show that it DOES affect purchasing power. If I have money and decide to spend it for a sports car, a vacation or anything else, that money creates a demand for something. If enough people do the same, the demand will go up enough to affect/increase prices, as per law of supply and demand. Very basic, no one can deny that.
If that money had remained unspent, no additional demand would have been created, leaving prices unaffected or possibly even dropping because of low demand.
Therefore, according to this non-economist, velocity of money does affect prices and purchasing power and is thus inflationary, creating a similar effect like printing new money.

JIMB February 2, 2009, 6:16 pm

Rick – Unless I am mistaken, the term “velocity” means something more than just the inverse of monetary demand … it means a dollar “circulates” as if $1 “does the work of” $7 if the dollar changes hands seven times in a year. But that’s the part of the definition that’s so objectionable. We don’t talk about “one house doing the work of 5 houses because it changes hands 5x in a year”. One house is one house. The services it provides is one house, which may vary according to the subjective judgment of the owner in comparison to other items, the same as a dollar.

I’d love to see the concept of velocity done away with as it seems more an excuse for state intervention in increasing debt money when things go bad. If they just stop expanding credit, that would be good enough for me.

Al February 2, 2009, 9:54 am

So, I should expect Dow 3,000 in the next 2 years and maybe the 1982 high or low by 2013-16?? That would put the Dow back to 1,000 area!!

Finally, Prechter and the daily reckoning crowd will be correct after 24-30 years.

As a trader it does not matter, but if does happen, I can see a revolution in the streets. It’s already happening in Europe and Asia!! What’s next “Big Brother.”

JIMB February 2, 2009, 3:21 pm

BTW, I should also note that trade is a result of prior wealth creation (offering something of value that has been produced) and thus “velocity” rises after wealth is produced (as trade rises). It is a result, not a cause. We all agree, I think, the government officials want to do things in reverse: demand before producing, spend before saving, etc.

JIMB February 2, 2009, 3:15 pm

Rick Ackerman (and Peter) – In my view, velocity isn’t a separate concept from trade. If I find that an exchange is beneficial to me, I make a trade, and “velocity” goes up. Otherwise I wait until it appears worthwhile to make an exchange. Since my funds are really a credit entry in my favor at the bank, it does not draw from anyone, like used to happen when we had a commodity money. Velocity is therefore a synonym for trade.

For deflation to happen, we’d have to see deposits plus cash held by the public (i.e. spendable funds) shrink. That hasn’t happened yet. I assume it would only happen if the U.S. government, for whatever reason, decided not to backstop the deposit liabilities of banks. Then they would immediately trade south of par.

What we have seen, is the banks having difficulty extending loans at a rate that expands deposits (i.e. sound money for a change).

The question is what happens if banks begin buying government bonds with those reserves which causes government deficit spending to be new money? That looks like inflation to me … at the least it is dilution of savings and dilution of the claims producers have to resources: both a huge negative.

Harry Ortheil February 2, 2009, 7:25 am

It’s not a matter of being born too early (von Mises), an economist born well before von Mises explained in detail how a single pound can co-exist in many places: Das Kapital, Vol. 3, Chapter 33. The economist’s name was Charlie something or other.

W child February 1, 2009, 10:49 pm

so you raised your rates last year due to inflaion when will you announce the lowering of them to take care or your overcharge for deflation

please critique mises

Ludwig von Mises observed that the concept of velocity
was “fashioned according to the patterns of mechanics” and called it
a “spurious notion”. (Ludwig von Mises, Human Action, Henry Regenery
Company, 1963, p. 399).

thanks ..

p.s. would you post the 100 items that will disapear from the shelves that you alluded to in a post .. i suspect prices on those items will drop

pps my insurance premium just went up 12%

your site a 11 on the scale of ten

Rick Ackerman February 2, 2009, 1:18 am

After reading Frank Shostak’s treatise on Mises and money velocity, I am unpersuaded that money velocity is irrelevant. Perhaps Mises was born too early to imagine how a single dollar of deposits might in mere hours come to co-exist in several places simultaneously? Here’s the link: — and Shostak is definitely the go-to guy on this subject.

cameroni February 1, 2009, 7:56 pm

Well said but still confusing.

I think we all need to look seriously at both sides of the equation. Inflation and Deflation.
We have such a confusing set of signals coming at us that every investor (including the experts and the analysts) disagree about how the future will play out. But let’s keep an open mind to it all and just look at the facts.

Your “Calling all Inflationists” thread was really great Rick. Enlightening too. And from a terrific group of contributors. Can you start a new thread from the other point of view now.

Call it “Calling all Deflationists”. I am really interested in hearing the deflation opinions. I am not so old and fixed in my thinking yet that I can’t hear the other guys viewpoint. So bring it on. Let’s hear the challenge and analysis from the other point of veiw.

All the best to you as always,


Rick Ackerman February 3, 2009, 9:34 am

Since I’d asked for comments from deflationists, I have deleted a few of the more egregious rants from inflationists. Take your drivel to iTulip if you need a place to expectorate. Inflation is something to be found only at the grocery store these days. We should be concerned about the cosmically larger force of deflation at the moment, since it has caused a hundred trillion dollars worth of assets to disappear so far and is only just getting started. We’ll return to the subject of hyperinflation when the Dollar Index breaks below 70.

NOTE: From this point forward (i.e., 9:40 a.m. Tuesday, EST) I will publish inflationists’ letters only if they attempt to rebut specific points raised in my commentary during the last two days.

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