There is no way policy makers will allow deflation. That, you can count on.
Why do you assume policy makers can control behavior so well and or ‘growth” for that matter. Collective behavior will cause deflation. All the printing and propaganda in the world can not cover up that fact that economic growth is over in the west the foreseeable future. Sure, it may display a few “growth” like features for months at a time, but it is over. The only thing that keeps the economy from imploding is mass delusion and dreams of growth. Beyond the psychological component is the hard structural mechanics of the system and it’s those mechanics that are hopelessly broken. When we take that collective psychological shift it will start again and restoring confidence will be that much harder than last time. Policy makers can’t do a thing when the herd turns on a dime.
Some wisdom from Charles Hugh Smith:
The Titanic offers us a timeless analogy for denial and a frantic, too-late acceptance of grim reality. Had the doomed ship’s leadership actively accepted the challenge to save as many lives as possible, then lifeboats would not have been sent off half-full. The sea was calm; boats could have been safely loaded beyond their designed capacity, and crude life-rafts might have been lashed together. As poor a solution as a lashed-together assemblage of buoyant materials would have been welcomed as a better alternative than certain death.
But instead, the “plan” was to maintain a veneer of normalcy: the band played on, even as the bow sank lower into the unforgiving icy water.
Fed chairman Bernanke, Treasury Secretary Geitner, President Obama and Congress are all ordering the band to play spritely tunes of rising holiday spending, endless borrowing, and the carefully crafted propaganda of Fed manipulation, statistical legerdemain and happy-talk about how the Monster will be gone when we open our eyes.
Since we are feeding the Monster with our very denial and derangements, then that is impossible . The longer we keep our eyes closed, hoping we can avoid any meaningful change, any meaningful adaptation and any meaningful sacrifice, the more fearsome and powerful the Monster becomes.
We can’t escape the confrontation, and the longer we put it off, hiding under our bed, wishing it all away, the more likely our panicky collapse when reality forces our eyes open
