Since I’ve posted and linked many videos of Peter Schiff, I feel obligated to post this link to “Peter Schiff was wrong.”
I’ve always associated inflation with an increase in the money supply. But what if “money” is not only cash? What if it includes easy credit. If everything has been priced on the assumption that consumers had easy credit, then prices are already inflated. The credit itself is part of the inflation.
Then when credit stops, prices have to fall. A lot.
Basically, via credit we are bringing “new money” into the economy from the future. If that suddenly goes away, then the money supply decreases.
So I have no idea what the future holds. I don’t know how all this will translate. I just thought I’d let readers no.
What I find much more confusing is the claim that foreign markets will not recover without our buying. This seems counter intuitive. You would think that people who make things in India and China would be able to trade with each other and leave US behind. But that doesn’t seem to be happening.