[LurkingSince'98]

Travis,

I have also wrestled with the inflation/deflation scenarios and keep coming back to the same point on which I am stuck - If $1 Trillion is mortgages reset and seize in the next year or so and the CDOs and MBSs based on them crater in an amount of $500-750 Billion - How could the Fed or gov every inject enough liquidity to compensate for that deflation? How would they get the $1.5 Trillion or so into the system?

Either Inflation or Deflation we are screwed and not in a nice way.

Regards,
Lurking’

[Travis McGee]

Inflation and deflation are not opposites so much as the two sides of the same coin, being an economy finally run to ruin via infinite credit creation. Once the game is up, there is no "out" other than to start over again, but govt's usually try to print their way out of the disaster (hyperinflation) and when that fails it goes the other way.

"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."

~~Ludwig von Mises