i think we must face it ..........., page-20

Hi rowingboat,

As I see it, there is a distinction between a debt deflation and a general "goods" deflation. In the first case, you look at asset prices and the debts which have supported the build up in prices. At present, they are deflating. The government, however, is doing everything it possibly can to stop that from happening, by creating new public debt to prop that up. They're not doing it fast enough, so we still have debt and asset deflation.

On the flip side, we have the real, productive economy. Last I looked, while my petrol is a bit cheaper, it's not massively so. My beer is more expensive, as is my bread, milk, the wages I pay my employees, my utilities, phone, Foxtel...you get the picture. There ain't no deflation in the "real" world, outside of the banking and investment sectors.

So, while there is real pain and fear in the asset/debt elements of the economy and that is spilling over into the real economy, the solution being administered by the public sector, of increasing debt and arcing up the printing presses, may or may not be enough to slow the asset/debt collapse, but before too long (this year), it will definitely start to show up in an accelerating rate of CPI inflation. IMO.

I'm going to be real interested to see what Bernanke says, if he creates CPI inflation, at the same time the housing market and general economy continues to tank.