This is not a doomer-gloomer post. Yes, we are in weird times. Nobody needs to be reminded of that though. But I wonder, and I wonder what you all think in these terms. We have had recession. It may still be active. But the talk is about recovery, or a double-dip event. Then we have fed-speak in Jackson Hole. And he said something interesting. He is driven to maintain a 2% inflation rate. On the surface this sounds dovish. No? But what occured to me is he may be fighting Deflation, or worse, the prospect of depression. The difference between recession and depression is, recession means people have money but are not spending. We know money has been flowing freely as of late. Some buy big screens and washing machines or pile it into their brokerage account or savings. But many are just barely getting by, or worse, not. Depression means people just plain not spending because they don't have money. For much of anything. So I ponder, what is the fed battling. Is he just wanting 2% inflation or better? Or is he seeing down the road where 2% may not be enough to keep the keel upright. I am curious of your thoughts or opinions on this. I have been thinking about this since I first heard the report out of Wyoming. Thank you.
I completely agree with Mastar. Control of the debt cannot be regained at an inflation rate of 2%. I believe we need something closer to 5~7% to keep the ship from capsizing. The current debt spiral is going to have serious repercussions in the future. When the whiplash comes and the country is financially crippled, investors like us are going to do even better than we are today. The point being; I don't see much reason for us to fear, regardless of what happens to the economy.
I am by no means properly educated on macro/microeconomics, but I have thought about how we plan to address our debt eventually. Due to this thread, I found a very interesting research paper written in 2009 about the then debt crisis (which seems quaint vs. now): https://economics.ucsc.edu/research/downloads/using-inflation-to-erode-debt-nov27-09.pdf The last paragraph: "Moreover, history suggests that a modest inflation may increase the risk of an unintended inflation acceleration to double digit levels, as happened in 1947, and in 1979-1981. Such an outcome often results in an abrupt and costly adjustment down the road.22 Accelerating inflation had limited global implications at a time when the public debt was held domestically and the U.S. was the undisputed global economic leader. In contrast, unintended acceleration of inflation to double digit levels in the future may have unintended adverse effects, including growing tensions with global creditors and less reliance on the dollar.23"
