I was a gold bug, but now I don't know where to turn. But if deflation really take hold of the nations, just think who will be the victims and who will be the winners. The victims will be those with over inflated assets, as they'll need to sell them off for desperately needed liquidity. That'll will mean assets will become more affordable for our young generation, who will need to go less into debt than if we don't have a reversal. The liquidity created by the sell off does several things - it alleviates the tension one initially had, as money would be available for spending where it's needed. The more people who find themselves in that situation, the more money will eventually start to circulate through the system. But it will take time.
The fact remains though, that left as it is, the wealth gaps between the wealthy and the working class is far too great for normal human activity to continue. Allowed to run its course, our economies will retract and quickly bridge the gaps between all classes - something that that the 'precious' ones of our society 'DO NOT WANT'!
As I said in the past, if we go down, would someone who has a low paying job that rents be greatly affected? Or will it be the ones holding massive debt and assets that no one wants to buy? The guy who's renting will see nothing change - he will sleep the same as he did when the economy was doing fine. Where as the others with the high priced assets will be wanting something to be done! And in reality, that's what they've been doing. I'm pretty sure that on the board of the RBA you will find one member who happens to be a CEO of a top retail company.
That is one of the reasons why people have too much debt today, because the economy was geared to reward the elite at the expense of everyday people. If interest rates were kept in check with the real world inflation, then economic growth would have been very, very slow and stable - not much fun for corporations, no multi million dollar bonuses for CEOs, but much more stability and a lot less debt amongst the public.
So here we are. Interest rates are still quite low, and yet, Australia holds its breath on the eve of the every rate announcement. That just proves how much debt is in the system - that just proves how fragile we have become. Because in years gone by, no one would have taken much notice of rate moves when rates were so low, simply because the public was not 100% dependent on low rates for survival.
