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The first fallacy in Schiff’s argument is when he claims that interest rates would go up if the U.S. tried to borrow long-term instead of short-term.

The second fallacy in Schiff’s argument is when he claims that lenders will no longer be willing to loan money to the U.S.

His 3rd fallacy is when he claims that we can inflate our way out of debt.

His 4th fallacy is when he claims the Fed will be *forced* to raise interest rates. Look at a Japan. Japan has had 0% interest rates for two straight decades.

Schiff doesn’t get it.

His 5th fallacy is that the Fed buying U.S. debt debases the Dollar. That’s not how the Yen has played out for Japan.

So here’s a shining, multi-decade example of what happens when you buy your own debt in Japan, and Schiff can’t see it.

You don’t get runaway hyper-inflation when you are in a liquidity trap.

Think for a moment what inflation means. Forget the eggheads who say “it’s an expansion of the money supply and has nothing to do with prices.”

Inflation means that too many Dollars are chasing too few goods...that people are bidding up houses...that people are bidding up stocks...that companies are bidding up salaries and poaching employees from each other...that the speed of money has accelerated.

That’s not where we are. Look at Japan. Japan’s speed of money has declined. Japanese real-estate today is worth half what it was worth back in the 1980’s. Japanese stocks today are worth only a quarter of what they once brought back in the 1980’s.

Yet Japan has borrowed and spent **VASTLY** more than has the U.S.

What Japan worked itself into by 1989 was overproduction. Too many goods being chased by too few buyers.

The entire world has this overcapacity problem now. Too many shopping malls. Too many ships. Too many trains. Too many aircraft. Too many office towers. Too many homes. Too many factories.

And all of that production capacity was debt-funded. Everybody owes money on every factory, office tower, ship, aircraft, shopping mall...everything.

You can’t game overcapacity by simply “running the printing press.” Deflation won’t be fooled.

What you *can* do is delay the correction by propping up values at unnatural levels. You can delay the day that the Markets find a true bottom in real-estate, labor, and stocks.

But that also delays the recovery. Those artificially high prices won’t stay high forever. Eventually they will fall to their real bottom.

Deflation.

Not hyper-inflation.

The opposite.

Deflation.