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Nigel Watson

Why deflation won't happen

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In the absence of government and central bank intervention, a period of credit expansion (crack-up boom) will always be followed by a period of credit contraction. During the contraction prices fall - a conventional deflationary bust.

 

The above is what SHOULD happen. However, it is very unlikely that this deflationary bust will be allowed to occur because it would cause bad losses for the banks, who, as we all know, are the real people in power. Instead, there'll be more more money printing, to support nominal asset prices and, therefore, the banks.

 

Faber's view here

 

http://www.arabianmoney.net/gold-silver/20...set-allocation/

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In the absence of government and central bank intervention, a period of credit expansion (crack-up boom) will always be followed by a period of credit contraction. During the contraction prices fall - a conventional deflationary bust.

 

The above is what SHOULD happen. However, it is very unlikely that this deflationary bust will be allowed to occur because it would cause bad losses for the banks, who, as we all know, are the real people in power. Instead, there'll be more more money printing, to support nominal asset prices and, therefore, the banks.

 

Faber's view here

 

http://www.arabianmoney.net/gold-silver/20...set-allocation/

very interesting.....

Terry Laundry is almost as negative on the outlook; have a listen to his audio and long term T-Theory chart.....really negative

 

Audio: http://ttheory.typepad.com/files/ttoaudio20100808parta-1.mp3

Chart: http://ttheory.typepad.com/files/adts20100806pdf-1.pdf

 

hope he doesn't mind my posting this, but it's good stuff.....

 

MunsterK

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