Despite currency wars, zero interest rates and world central banks outright monetization, deflation is not going away. Globally. Case and point…..
- Deflation risk is now a worry even for China
- The latest signs China’s trillions in debt are getting tricky to handle
Deflation is not bad. Well, unless your economy is leveraged to the hilt and you have to rely on low interest rates and money printing to wiggle your way out of it. As is the case with most, if not all, global economies.
Can anything be done to prevent deflation at this juncture?
Sure, an outright debt and currency monetization. Something the FED has been trying to do for quite some time. Something that they have failed to do despite introducing a $1 Trillion QE and keeping interest rates at zero for way to long. That is not to say that they won’t be successful in the future, but rather, to suggest that blatant currency destruction is the only viable option they have left.
In other words, there is no possible outcome where this ends well. And while they might be successful at keeping deflation at bay for a little bit longer, eventually it will overwhelm the global economy. Just take a look at Japan and you will have a fairly good idea about how this ends.
