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.
It is a tightrope the Fed is walking..as for bank runs the Banks have learned a few things since the Great Depression and during the recessions we have had: what they would do is to go to the 90 day withdrawal rule whereby a customer has to submmit a request in writing before they can withdraw their money..That is probably in their Savings Account Disclosure Statements that most people just throw away...so while inflation could spiral up and up, people would have to cool their heels and hope their bank remains solvent til the 90 days expire...or the government could just nationalize the Banking system and slap all kinds of rules on depositors and creditors...
Cash is indeed King, and more folks will realize this in the next six months. It would be prudent for them to withdraw a substantial amount out of "whatever" and do what I have been doing. Even setting aside a small amount (grand a month in twenties until this problem levels out) could be a life saver if the S.H.T.F!
There is no way to know what may happen...But!...just like having a gun, better to have it and not need it, than need it and not have it!!!