Fighting Deflation With Inflation

In a nutshell, that's what they're doing. The bubbles are doing their best to burst (asset deflation) and the Fed is doing their best to keep them from bursting by printing boatloads of money (inflation).

It's a contest between gravity and hot air. Which wins???

My guess is both! There will be further collapse in asset values - real estate, stocks, etc. (this is taking place now and has proven impossible to stop) so deflation will have it's day. Simultaneously, there is inflation in things like consumer products, commodities (metals, food, etc.) so inflation will show it's ugly face in at least some areas of life. (If you're on board commodities this isn't necessarily a bad thing, but if you're onboard real estate you're going to have to pay close attention to the water level and your nose!)

Caveat: if we have any kind of recovery (an increasingly unlikely prospect) then expect inflation to run rampant, in a way that would be more familiar to Robert Mugabe than to us. Same applies if something impacts the oil supply, but then we could have serious inflation without any real recovery.

Inflation actually occurs whenever the fake money supply is diluted with more fake money. It's just pretty dang tough to see it right now, what with all the bubbles bursting. It's there nonetheless - just ask the overseas folks who trade for our dollars!

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