Saturday, December 6, 2008

Inflation or Deflation?

Deflation at first.

[I was wrong on this in previous ramblings, my error was overestimating Brazil, China, Russia, and India’s economies’ capability of affording and consuming world energy resources. Energy consumption is down, and the increasing energy prices I had expected, were not to be… for now.]

The Administration will consider this deflation, or possibly lack of significant inflation, to be license to print and spend money on non-productive things, leading to inflation, then massive inflation, and the eventual destruction of the dollar as we currently know it.

The above chart is interesting, but understates the debt. The debt is $50-60 trillion in unfunded liabilities, plus $10 trillion in hard debt, plus the recent trillions.

Credit Default Swap costs on the ten year Treasury are up 2500% in the past year.

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