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Thursday, July 31, 2008

Breaking radio silence

How much debt does the USA have, compared to its income? According to Ned Davis Research, the previous all-time high was in the Depression of the 30s (265%); NDR's latest estimate is 350%, The Mogambo Guru reports.

So, inflation or deflation? The Mogambo Guru rants that only inflation (which he hates) can save us now. But in the first link above, Louis P. Stanasolovich comments:

High debt levels also have another side effect: disinflation. Because consumers and businesses have limited spending, they must retrench once they reach their saturation points. When the demand for goods and services diminishes due to the over-extension of credit, the result is disinflation.

In other words, we will have to live poorer - no matter what the currency does. We see in Zimbabwe that you can have billions and it won't buy you a square meal. What inflation can do, is disguise the problems for a while (as it did post-2000) - until the system breaks down completely. Who has the public spirit and grit to stop the charade now?

By the way (since The Mogambo Guru loves gold)... Krugerrand = going out to get more champagne.


RobW said...

The Labour Government are just going to make things worse as well.

They're so desperate to retain power they will try any paliative nonsense whatever it's long term consequences.

We have to accept to some degree we're going to have to take the last 10 years on the chin.

James Higham said...

In other words, we will have to live poorer - no matter what the currency does.

Hence my latest posts. Knew you couldn't stay away. :)