Inflation, Deflation or New Nation?

George Washington’s Blog
Tuesday, Oct 28, 2008

Smart people like PhD economist Krassimir Petrov argue that we will have stagflation – inflation plus stagnant growth.

Other smart people like PhD economist Nouriel Roubini argue that we will have deflation (and see this).

But the debate about whether we will have inflation or deflation may be overshadowed by the question of whether the whole playing field is going to shift.

Specifically, inflation and deflation are both things which occur relative to a certain currency. For Americans, this means asking whether dollars will buy more or less.*

(Article continues below)

But the G-20 meeting in mid-November could totally change things. The biggest creditor nations might demand that a new world reserve currency replace the dollar (they’ve hinted at this). Or they could demand that the U.S. dollar go back to the pre-Nixon gold peg agreed to under Bretton Woods (they’ve hinted at this, too).

If a new nation takes over the role – which the U.S. has held for 64 years – as issuer of the world reserve currency, this will fundamentally change the landscape on which the inflation versus deflation debate occurs. The dollar would fundamentally be changed and – with it – the risks of inflation or deflation.

Confidently forecasting inflation or deflationary before the G-20 meeting is like trying to use the team roster to forecast who will win the second half of a football game when a major earthquake has just tilted and uplifted part of the gridiron and ripped deep canyons in another part.

* The Austrian school of economics points out that inflation and deflation are really about the size of the money supply, and not prices. If a new currency replaces the dollar as reserve currency, that would still shift the debate onto entirely new territory.

Of course, the U.S. is, or may soon become, insolvent. This would also dramatically shift the debate.

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5 Responses to “Inflation, Deflation or New Nation?”

privateer Says:
October 28th, 2008 at 8:01 am
After the smoke and dust and money clears who will be left standing. Americans better gear up for the worst is yet to come with Democraps in total control of every one, the congress and senate, the white house, Those who voted for them will love them, Nasty Polosi will make sure that the new communist regime will be created, and there uncontroled spending on social programs and on top of the bail outs the createns in congress and senate who voted for it will sustain it. until we Americans are in rags in front of the soup lines, Mc Cain or Obamma, (Mut and Jeff) What the democrats did to California, in the 90s will be a reflection of what this nation will look like when they are done, all I see is the nazis handing the septer to the communist, the problem is they are useing the same play book, each compleating a part of the plan, step by step, until compleation, Hail to the N.W.O.
Tom Delay Says:
October 28th, 2008 at 8:28 am
Beats for the revolution!

http://www.tomdelaybeats.com
kwitcherbychinanddosomething Says:
October 28th, 2008 at 4:01 pm
Well crap! If Obama wins and this country wants to reinvent itself, let me tell you right now, i refuse to wear robes on my body and rags on my head!

Hey Obama!! If you want to be president of a country, go HOME and run for office in AFRICA!
They need your kind of change, we don’t!!
Mikey sucks donkey nuts Says:
October 29th, 2008 at 6:24 am
Mikey, shut the F|_| C |< up!
Freedom Says:
October 29th, 2008 at 1:23 pm
My comment to all those a$$ clowns cluttering up the posts with why Alex does and not do something they want him to do…..

GET YOUR OWN SHOW AND DO IT YOURSELF, TAKE OFF THE DIAPERS, WIPE OFF YOUR CRAP AND GROW A PAIR.

Until then, stop trying to tell your betters what to do you weak, incompetent children.