Thursday, April 9, 2009

Inflation or Deflation

Economists seem to be divided into two camps in predicting the medium-term U.S. situation.

Some predict Japanese-style deflation (Japan still has not recovered from the adverse effects of their stimulus package of the early 1990s, and asset prices are again tumbling.) The others predict Weimar Republic-style inflation. Just check out the Fed's website to see that the printing presses are running overtime. (The line on the graph showing the number of dollars being printed went almost vertical recently.) I've read about both theories from multiple experts and they are both well reasoned.

(A third camp is typified by the Paul Krugmans of the world, who recommend making as many disastrous mistakes as possible, but the Nauvoo Commuter pays them no heed.)

So which way are we headed? We all want to know.

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