My comment: The orthodox theory tells that the next step would be hyperinflation. In particular once we see the unprecedented amount of liquidity that the Fed, and now other central banks are "throuwing" to the market. Under such theories, after hyperinflation, we should suffer deflationary recession. Since some weeks ago, some people are starting to argue that we could skip the hyperinflation step and jump directly to deflationary recession from, and caused by, this financial crisis.
Deflation is a decrease in the general price level, exactly the opposite to price inflation. The last big deflationary period in US economy was between 1930 and 1933. It was not after an hyperinflation period over there, but that period happened in Germany and other European countries and by contagion it passed to USA. It is an spiral as hyperflation is. I mean it is as bad as hyperinflation and that spiral is as difficult to break as the hyperinflationary spiral. The consequence of deflation is a general collapse of investments, consumption, trade, etc. I mean a giant recession. For people it means giant unemployment levels. During the great depression in the 30s it peaked 25% in USA and above 50% in many countries in Europe. This time it would be worse in USA than in Europe. Deflationary recessions use to last a decade more or less, let us say between 5 and 20 years. I would not post that theory if I did not see that a certain indicator (called the Baltic index) shows that international trade is falling very fast. Even after I have watched it, I hope that this process does not accelerate and we can pass trough the hyperinflationary period as we expected before. Anyway, today I am starting to consider it as posible.. U.S. Retail Sales Slump 1.2%, Most in Three Years (Update2) http://www.bloomberg.com/apps/news?pid=20601087&sid=axCzcG1d.YTg&refer=home --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "World-thread" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [EMAIL PROTECTED] For more options, visit this group at http://groups.google.com/group/world-thread?hl=en -~----------~----~----~----~------~----~------~--~---
