Jesse's Café Américain Thu 2010-04-01 08:44 EDT
The Monetary Base During the Great Depression and Today
...I always allow that deflation and inflation are policy decisions, at some point a threshold can be passed, and the likelihood of one event or the other becomes more compelling. The US is at that crossroads wherein it must change, or go down the painful path of selective monetary default, of a degree different than a hyperinflation, more similar to that which was seen in the former Soviet Union, than the monetary implosion of a Weimar. One can watch the growth of the traditional or even innovative money supply figures, and be reassured at their nominal levels, only to misunderstand that money has a character and quantity of backing, that can erode as surely as the supply of money can increase, to produce a type of inflation that comes upon a nation quickly, like a thief in the night. It will bear the appearance of stagflation, because it is caused by a degeneration of the productive economy coupled with a disproportionately increasing money supply...