Well, to my way of thinking, there are only two real possibilities:-
1. Serious Deflation, of the Great Depression sort (or close);
2. A period of severe contraction (living it, now), followed by enormous inflation, followed by....?
The only non-asset or debt-related thing I see deflating in my daily purchases is petrol. Everything else - bread, milk, electricity, rates, Foxtel, etc. - is definitely not deflating. As I understand it, in the USA the discretionary items are deflating, but not the essentials (except gasoline and heating oil).
We are at a stage where either 1 or 2 could result. However, we are not at a point where Heremes huge confidence in deflation is warranted, IMO.
Would I rather bet on Heremes, who believes in No.1? Or would I rather bet on Bernanke, who understands No.1 and, instead, want to manufacture No.2?
