Its Official: U.S. Trapped in an Extended Deflationary Cycle → Washingtons Blog
Its Official: U.S. Trapped in an Extended Deflationary Cycle - Washingtons Blog

Wednesday, July 22, 2009

Its Official: U.S. Trapped in an Extended Deflationary Cycle

Bernanke has just confirmed that the Fed's prediction is for extended deflation.

In an OpEd in the Wall Street Journal, Bernanke writes:

My colleagues and I believe that accommodative policies will likely be warranted for an extended period. At some point, however, as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road. ..

As the economy recovers, banks should find more opportunities to lend out their reserves. That would produce faster growth in broad money (for example, M1 or M2) and easier credit conditions, which could ultimately result in inflationary pressures...

There you have it . . . straight from the horse's mouth.

Deflation is the problem "for an extended period". Inflation could only threaten "down the road", if faster growth and easier credit conditions "ultimately" might result in inflationary pressures.

Remember, however, that food, energy and healthcare costs could still skyrocket, even as most other asset classes experience deflation.

And if the U.S. defaults on its debts, the dollar would experience massive devaluation, which would cause hyperinflation for U.S. consumers (because it would take more dollars to buy the same goods or services). If the U.S. defaults, all bets are off.


  1. Well, yes, there it is from the horse's mouth, but in this case the horse is a sociopath with no compunction to tell the truth. Seriously, is there ANY rational reason to expect Mr. Benanke to be either truthful or insightful? We have no reason, none at all to take seriously or on faith anything he says. He may tell the truth, he may lie, he may be accurate or he may be wrong. The only thing we know for certain is that we cannot trust anything he says. Ignore the words, pay attention to actions.

  2. No...he's not a sociopath. We are. We refuse to change, and thus we have no change. We continue to do nothing about outright corruption, fraud, murder, genocide and the like...and thus we have no change.

    This is why there is still unlimited, unfettered access to freedom of speech on the internet. Because the powers that be (PTB) know that people feel better about the situation just openly talking about the issues. The internet to them is not a threat, but it is our crutch. People complain, explain, disdain, sustain and act in pain on the internet about a myriad of problems.

    AND THEY FEEL BETTER. So much better, that they do absolutely nothing else. Well, most do anyway. There is a very small minority that could care less what is being said on-line, but are out raising hell about the blatant criminal actions of government and corporations, including bank.

    So if you know he's lying. Write him a letter and copy your representatives. And get 10 others to do the same. I don't want to hear about it on the internet...over and over again.

    Now I bet you feel much better...huh?

  3. And Ben said he saw green shoots. What is Ben smoking?

  4. I'm absolutley amazed that American people have not gone after the shyster bankers, Wall street fraudsters and the corrupt traitorous Congress who let this debacle happen. This was no accident. It was deliberate. It was all about greed and the destruction of America. The ones who suffer the most are people of the middle class or what is left of it. It's not to late to hang'em high.

  5. Not necessary to figure out if old Ben is lying (they ought to attach these clowns to lie detectors when they make speeches!)

    Just look at BRIC forcing the reserve currency to Special Drawing Rights currency. Listen to what Russia and the SCO have been saying over and's not IF the dollar falls, it's WHEN.

    So I agree, deflation will be a problem til that happens. THEN, hyperinflation.

    These bozos know the dollar is doomed. They are just leading USers on a merry stroll down memory lane. A bit like the Pied Piper...with so many rats following.

  6. Isn't deflation kind of a good thing? The dollar can buy more and prices fall. Cash becomes king again. I think people know this, as the savings rate has shot up recently. These are all positives.


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