myths, page-7

Menta, I have been reading your posts for a while. I don't have the financial intelligence to understand the deeper ramifications of what you write, but for some reason it rings very true all the same. Which is un-settling to say the least.

"central bankers and governments are shifting the burden of trillions of dollars worth of debt obligations from reckless creditors onto innocent savers and hapless taxpayers".

Agreed - but I thought this could only be done by diluting the existing money supply ie inflation.

I do understand the velocity of money, is not there to create the inflation.

Is there a historical example of Central Banks buying Bad debts and holding interest rates low and still could not avoid massive deflation? (probably not global b4)

Deflation = stay in cash, debt is bad, as value of money increasing from when you borrowed. Less spending and less borrowing.
Inflation = get into hard assets, debt is ok as value of money now is higher than later. Spending and borrowing increases.

Pretty important to get this right, but also would like to understand it b4 it happens if possible.

If the value of assets falls faster than the money supply created from the velocity of money, the prices of assets will fall, this system feeds into itself.

One thing I never understood was, why the US did not use debt created on direct spending on infrastructure repairs and upgrades, these are needed anyway and would create jobs, spending and demand, even if it did not manage to create lasting growth at least they would have some real assets.

Now I think I understand a little more clearly the risk of deflation. I also understand why PM enthusiests promote physical P. Metals as money without the counter-party risk, as an Inflationary play with built in defence from deflation. (providing it is not coming from too high)

thinking aloud...