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Faber vs. Mish: Inflation vs. Deflation

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Mar 12, 2010
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Marc Faber, editor of the Gloom, Boom and Doom Report and Michael "Mish" Shedlock, the man behind the economics blog, MISH'S Global Economic Trend Analysis were seen at Yahoo!Finance’s Tech Ticker, debating whether we will have deflation or inflation.

Mish’s case for Deflation:
  • Credit is contracting
  • Money supply is sitting on the banks’ shelves as excess reserves
  • There might be one more leg down for housing and certainly one more leg down for commercial real estate
  • States and cities around the country cutting back on budget
  • Berknanke can print the money, but unless it gets spent, it will not cause inflation
Faber totally disagree with the deflation thesis. His reasons:
  • Bernanke’s is quite capable to create a lot of inflation
  • The private sector has been acting rationally in cutting back on credit, but the public sector has been offsetting that by expanding
  • Other things bringing inflation: oil and equity prices will cause consumer prices across the board
Is it possible that both men are correct? In another word, we could have deflation first than inflation? To that, Faber stated it does not matter. Even if we have deflation, Fed will come with more stimulus measures which will bankrupt the western government

In other words, doomed if they do, doomed if they don’t.

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