The problem for the Fed, however, is that it despises deflation. Deflation destroys over indebted economies, producing mass personal bankruptcies and corporate defaults. Deflation also destroys overindebted governments, which depend on printing press money to pay their bills.
The task at hand for the Fed is to somehow control inflation without triggering a depression. But after two decades of non-stop money printing the economy and government has come to depend on it.
What happens when the Treasury issues debt and the Fed doesn’t buy it? What happens when interest rates rise in earnest? What happens when the DOW falls below 15,000?
Will the Fed reverse course? Does it really matter, either way?
Like Casey Jones barreling down the tracks, there’s no earthly way of preventing a smashup. This is the ultimate crash and burn scenario. Inflation? Deflation? You can count on both…
…we’re in for the ride of a lifetime.The Solution to Inflation | Economic Prism