What the deflationists fail to acknowledge is that in a purely fiat monetary system deflation is a choice not an inevitability. To put it in simple terms, if a government is willing to sacrifice its currency there is absolutely no way deflation can take hold in a modern monetary system.
It doesn't matter how large the debt contraction is, 10 trillion, 100, or 1000 trillion, any government with a purely fiat currency can, with the stroke of a computer key, print enough money to wipe out the debt. Granted, they will destroy the currency by doing so, but at some point we are going to be faced with the choice of print or deflate.
Wednesday, September 8, 2010
Posted by Nick