Can we expect rampant inflation? If that is a danger, wouldn’t it be better to put your assets into precious metals than cash? That is why gold is so high now, isn’t it? Because of the decline in the value of the dollar and expectations of increasing inflation and declining dollar value.
Inflation is what we’re getting now. as the Fed dumps cash into the system in a desperate bid to make sure the underpinnings of the mortgage market stay solvent.
Deflation is what we’ll get if the mortgage market fails. As zillions of virtual dollars disappear, solvent companies will suddenly have no cash to pay their bills, and banks will find themselves with no cash to satisfy depositor demands. A run on banks will follow, and the rest of the economy will spiral down with them as the remaining cash is sucked out of the economy like space dust down a black hole.