2012-06-07

No economic growth since 1980?

Karl Denninger has an updated chart on deflation in Oh No, Not The Truth!
Nobody over there (or here) is talking about this, of course, and the reason is simple: The rich and powerful in the banking industry made "their money" not through industry and innovation but through fleecing the people via unbridled credit creation, which they controlled!

If that is withdrawn then their "wealth" suddenly disappears from whence it came, and what's worse is that the pension funds and insurance companies who sold contracts to pay specified amounts of money predicated on this credit creation being able to be maintained suddenly cannot make those payments and collapse.

It would be nice if we could avoid having to take this adjustment but even simple maintenance of the credit system at its present level is insufficient! The only way those promises can be kept is if the rate of expansion is maintained, and that's mathematically impossible.

And the longer we wait to take the adjustment the worse the economic impact will be.

I'm more focused on 1997-1998, when the Asian Crisis erupted. The period since then clearly is a debt binge that fueled the housing bubble and GDP growth.

This chart shows the compelling case for deflation because the increase in credit has already occurred. There will be no further increase in credit without an increase in money, and thus far the governments of the world have not implemented true inflation plans. Up until now, all of the bailouts involve swapping debt for debt, leaving total credit intact. Deflation remains the most likely outcome until a political decision is made to truly inflate the currency, which would mean bypassing the central bank and having the government increase spending beyond tax revenues without issuing debt.

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