Reply #2: Nobody thinks inflation will be a problem [View All]

[Warpy]

especially the big money boys at the top. That's why banks and corporations are sitting on piles of cash right now, neither borrowing nor lending. In a deflationary period, the last thing you want to do is either lend or take on a lot of money that can never be repaid as the air gets let out of pumped up prices and everybody is a lot poorer in net worth numbers.

Consumers know this too, and this is another reason besides a precarious job situation that they're not spending. Why buy now when it might be cheaper later? Consumers are spendaholics in inflationary times, knowing that whatever they want will cost more in the future. They're paying down debt and saving their money now.

All this frugality will add up to causing a deflationary period even if we're not yet in one. My own feeling is that only hedge fund manipulation of the commodities markets has prevented significant deflation so far, and that manipulation has nearly run its course. Bubbles will get smaller and smaller as there is less and less money available to bleed off from small investors who jump in just a little too late.

Our system had simply become unsustainable and it's not sustainable yet. Until it is, it's going to be a bumpy economy.