If the infusion is done, credit is available at a lower interest rate,
but the infusion increases the money supply with respect to production
of goods and services, and results in inflation.
If the infusion is not done, credit becomes unavailable except at very
high rates, and that becomes an increased cost for almost every kind of
economic activity, which has to be passed on in the form of higher
prices for everything. Normally, a depression comes with deflation, but
when everything is based on credit, the result will be runaway
inflation, as government "prints" money to cover its own rising costs.
So we get it either way. An infusion just defers some of the impacts to
a later time, hopefully yielding a softer landing and less destructive
disruption of the "hard" economy -- plant, equipment, infrastructure,
tools of production ("capital" in classical economics).
The basic problem arises from overconsumption. We are living beyond our
means. But the transition to lower consumption has no easy path. We
can't just all suddenly move into smaller, cheaper houses (or shanties),
switch to bicycles, turn off electricity, gas, water, and sewer service,
or cut our food consumption to 800 kcal/day. For a vision of things to
come, examine the favellas of Brazil or similar settlements in other
countries. (Hint: No housing codes or zoning.)
Cory Nott wrote:
> Jon, can you explain #3 please?
>
> 3. Inflation, not just from an infusion, but from the failure to make
> one soon enough, rises to first 100% within a month, then accelerates to
> 1000% the next month, and continues to spiral until the monetary
> situation resembles that of Zimbabwe.
>
>
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