We experienced a great deal of inflation with the majority being credit inflation. This is what happens during deleveraging. But inflation can make the price of other things go up too. To fill that blimp, you need a great deal of air. Non-self-liquidating debt is consumptive. Your car loan is credit. Deflation is the opposite of inflation—a decrease in the volume of outstanding money and credit. If you question the psychological component, consider how large bank reserves are and how that money has not necessarily made its way into the economy. My economic laws tell us much about inflation and deflation. Inflation is an increase in the volume of outstanding money and credit. Housing finance became overly consumptive. If a hard freeze hits Florida and ruins the orange crop, you can bet oranges will be more expensive. The air let out during the Great Depression was the volume of a beach ball. Consider the price of higher education and the massive amounts of credit made available for this purpose.
Deflation will become a prominent part of the American lexicon in the years ahead. Borrowers have confidence that they can repay and lenders have confidence of debt repayment. Borrowing for the purposes of consumption does not generate cash flow to meet debt servicing. This is what happens during deleveraging. Inflation is an increase in the volume of outstanding money and credit. Our inflation has been very concentrated in financial assets which means the price of those assets has gone up. The blimp provides a sense of scale. The Wizards tried desperately to keep the blimp inflated through massive purchases of Treasury Bonds and mortgage backed securities. You can email him here: Non-self-liquidating debt is consumptive. While the book surveys classic discussions and accurately describes municipal institutions in Canada, it also explains why particular policies assume the specific shape they do. Before you can experience deflation you have to have inflation. The picture below is a metaphor for the amount of credit inflation in our economy. If you question the psychological component, consider how large bank reserves are and how that money has not necessarily made its way into the economy. But inflation can make the price of other things go up too. Deflation is the opposite of inflation—a decrease in the volume of outstanding money and credit. Protecting your wealth during the financial crisis. The cyberspace credit is easy to create and the Fed has done everything in its power to make it as easy as possible through low interest rates and interest rate sensitive asset purchases. The cycle can continue as long as debt usage enhances the ability to meet debt service. The recognition of each is typically gauged with prices. Lower prices mean what exactly? Financing home purchases also falls into this category albeit qualitatively. If the economy grows then sufficient value is created to repay debt. Your outstanding mortgage balance is credit. If you log in to check your bank balance, that is credit in cyberspace yes you are a creditor to your bank and an unsecured one at that.
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