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Its Official: U.S. Trapped in an Extended Deflationary Cycle

Posted By admin On July 23, 2009 @ 3:45 am In Money Watch | Comments Disabled

Washington’s Blog [1]
Thursday, July 23, 2009

Bernanke has just confirmed that the Fed’s prediction is for extended deflation.

In an OpEd in the Wall Street Journal, Bernanke writes [2]:

My colleagues and I believe that accommodative policies will likely be warranted for an extended period. At some point, however, as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road. ..

As the economy recovers, banks should find more opportunities to lend out their reserves. That would produce faster growth in broad money (for example, M1 or M2) and easier credit conditions, which could ultimately result in inflationary pressures…

There you have it . . . straight from the horse’s mouth.

Deflation is the problem “for an extended period”. Inflation could only threaten “down the road”, if faster growth and easier credit conditions “ultimately” might result in inflationary pressures.

Remember, however, that food, energy and healthcare costs could still skyrocket [3], even as most other asset classes experience deflation.

And if the U.S. defaults on its debts, the dollar would experience massive devaluation, which would cause hyperinflation for U.S. consumers (because it would take more dollars to buy the same goods or services). If the U.S. defaults, all bets are off.

Its Official: U.S. Trapped in an Extended Deflationary Cycle  290509banner [4]


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URL to article: http://www.prisonplanet.com/its-official-u-s-trapped-in-an-extended-deflationary-cycle.html

URLs in this post:

[1] Washington’s Blog: http://www.washingtonsblog.com/2009/07/its-official-well-have-extended.html

[2] writes: http://online.wsj.com/article/SB10001424052970203946904574300050657897992.html

[3] could still skyrocket: http://www.washingtonsblog.com/2009/07/inflation-deflation-and-got-you-prices.html

[4] Image: http://www.efoodsdirect.com/ammo-food.html?aid=14&adid=5

[5] America Is Either Going To Suffer Through A Deflationary Depression Or Hyperinflation: http://www.prisonplanet.com/america-is-either-going-to-suffer-through-a-deflationary-depression-or-hyperinflation.html

[6] The ‘gold is bad in a deflationary environment’ myth: http://www.prisonplanet.com/the-%e2%80%98gold-is-bad-in-a-deflationary-environment-myth.html

[7] Deflationary Depression in America: The Double Dip Economic Recession: http://www.prisonplanet.com/deflationary-depression-in-america-the-double-dip-economic-recession.html

[8] Former Treasury Official who Devised Formula for Rate-Setting Based on Outlook for Inflation and Growth Warns that Inflation Looms, Slams Fed Policy: http://www.prisonplanet.com/former-treasury-official-who-devised-formula-for-rate-setting-based-on-outlook-for-inflation-and-growth-warns-that-inflation-looms-slams-fed-policy.html

[9] Fed May Recognize Faster Growth, Maintain Low Rates: http://www.prisonplanet.com/fed-may-recognize-faster-growth-maintain-low-rates.html

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