I’ve read Mish’s argument for deflation, and I don’t fully agree.
For one, I don’t think we have seen the full extent of CPI inflation as result of the Fed’s slashing of rates, weak dollar, commodity and raw material prices increases etc.
I also know that retailers are only starting to pass on price increases, and I think later this year, early next we will see those effects.
Mish’s argument is people will spend less and drive prices down, but that only goes so far, because you can’t exactly put off buying food.
The most important factor in getting the US out this recession will be job creation.
The only area I see providing that will be the retiring of baby boomers over the next decade, but that of course has it’s own implications.
Delfation will only come once our Government has thrown every good dollar they can print at the problem and still not clean up the mess, and is forced to raise rates.
Though all of those could suddenly turn for the better and we’d still be a society based on debt, and I question how long that can last.
