[quote=qwerty007]
Josh, I really enjoyed this theory even if it did go over my head a little. I’m not even going to take a stab in the dark at the first para? When you say the dollar is becoming a commodity, do you mean cash reserves or USTs, or both?
[/quote]
Baranaby33 is not correct. Repaying debt is not deflationary in the classic sense. If I loan you a dollar, then you pay me back a dollar and ten cents a week later the net money supply is the same. Especially since I’m just going to loan out your $1.10 to someone else.
It *can*, however, lead to lower prices in some cases. If I’m giving you my $1.10 I’m not using it to buy food, fuel, or speculate in the futures market (all inflationary). In the current environment its somewhat deflationary as the banks aren’t lending.
Debt destruction means a default. You loan me a dollar, I use it to light my cigar and then give you the finger. The net money supply is reduced, leading to true deflation.
