Thanks 4plexowner…finally someone who knows WTF they are talking about.
Kewp, I usually agree with what you have to say, but you are off base on this issue. Believe it or not, you have actually espoused what Mish believes: A net Deflation or contraction of the credit / money supply. Yes, the Fed will likely inflate (although they have not done so as of yet)in order to counteract the Deflation of the Credit Bubble but the net effect will still deflationary. Re-Flation attempt will result in money going to places that the Fed cannot control like you indicated and there will be increases in certain commodities and goods. The inflation will not make it into Wages or RE again though and the FED cannot make that happen.
Prices will rise on necessities and drop on luxury goods and capital items (RE, Stocks, Equipment). Credit will be hard to maintain and obtain. Cash will be scarce.
This is the worst of scenarios to be honest and it’s why I am so pessimistic about the next several years. It is even worse for those who have heavy debt loads right now.
Two things that people need to get out of their heads or they will be in a lot trouble in the next few years:
One, the FED will save my house price appreciation via inflation. No they won’t. Why? Interest rates wills skyrocket if they do negating the effect. Would put us at the brink in weimer style HI. That would be game over for everyone.
Two, inflation will make its way into our incomes, and no, a $1,200 Gov check will not count.
