Tuesday, June 30, 2009

Deflation

David Calderwood has written a compelling article on deflation.

He summarizes, "...there's a critical difference between currency inflation and credit inflation, and that as long as the monetary authorities, banks, and public are collectively optimistic and trusting, both currency and credit appear to have the same effects on prices, but that if credit builds up to a fantastic level as now, when pessimissm and distrust take over then a crucial difference between currency and credit is revealed."

He has a great point, and one that we must consider.

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