Feel That? It's The Chill Of Deflation

TMO ^ | 2-9-2015 | Chris Mayer

[Mariner]

"Obama borrowed seven trillion dollars, printed another three trillion and proclaimed himself an economic genius."

None of which is relevant unless we default.

Which is not unlikely.

Debt deflation is all about default. Persons, Companies, Banks, Cities, States, Nations.

It's about future capacity not being able to pay off the largesse of the past as well as current needs.

Capital retracts and waits for the dust to settle as the real economy contracts, seemingly endlessly.

If you have CASH assets (not debt assets like T-Bonds), but actual cash, you are KING.

If you have all your cash tied up in Commodities and Real Assets, while you get to keep those, they are not worth nearly as much cash...but probably kept their relative wealth.

If you have debt, you are dead meat and will be driven to certain default...losing any real and cash assets you may have.

[Mariner]

"One theory I have heard for the absence of inflation, that SHOULD accompany such massive borrowing and money-printing, is that even with all this, we haven't begun to catch up with the unmeasurable explosion in productivity and value associated with technology. "

The issue is Debt Saturation slows the circulation of new money.

The Velocity of Money is at historic lows not seen since the early 30's.

[LS]

Doesn’t seem to explain anything. In theory then, if people kept assuming more debt money would continue to slow down forever. I agree velocity is low, with $10 trillion sitting on the sidelines waiting to be invested.

[Mariner]

"In theory then, if people kept assuming more debt money would continue to slow down forever."

Correct.

And it will.

That's why the entire world order is on the cusp of change.

A "New Debt Economy" will emerge as the most likely scenario.

But it won't be dollars. The dollar is destined for the dust-heap.

I suggest the new instrument will be the "New Dollar" after the USA repudiates it's debt.

Of course, that implies enormous upheaval, millions dead...if not a billion...and an entirely new governance in the US.

Regime Change.

No nation/regime has ever survived the collapse of it's currency...From the diluted Roman coins until today.

We'll not be the first.

And no, I'm not a conspiracy theorist. Or subscriber.

I don't think anyone is in charge...except the devil if he exists.