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IPFS News Link • Economy - Economics USA

Grinding Down Into Deflation: The National Debt Disaster No One Is Talking About

•, By Brandon Smith

I suggested that stagflation would become a household word again and that the majority of American concerns would revolve around rising prices coupled with stagnant wages and falling production. In 2018 in my article 'Stagflationary Crisis: USA's Ongoing Collapse, Understanding The Cause' I noted:

"Years ago there was a rather idiotic battle between financial analysts over what the end result of the Fed's massive stimulus measures would be. One side argued that deflation would be the outcome and that no amount of Fed printing would overtake the vast black hole of debt conjured by the derivatives implosion. The other side argued that the Fed would continue to print perpetually, resorting to QE4 or possibly "QE infinity" and negative interest rates as a means to stave off a market crash for decades (like Japan) while at the same time initiating a Weimar-style inflationary bonanza.

Both sides were wrong because they refused to acknowledge the third option – stagflation."

The process of stagflation is difficult to track because there are multiple paths that it can take, many of them largely dependent on the whims of the central bank and its policy decisions. All we can really do is look back at the limited number of historic  examples and guess at what will happen next. In the 1970s, stagflation nearly crushed the country with inflation rising by 7% to over 14% per year for a decade while the general public eventually faced high unemployment.

When I hear Zennials complain about being born into the "worst economy ever," I have to laugh because they really have no clue. The 1970s was FAR worse in terms of erosion of buying power as well as overall poverty. If you look at film footage and photos of urban areas from LA to NY to Philadelphia during that time, many parts of these cities looked like bombed out war zones. The country was truly on the edge of disaster.

In the early 1980s, the Federal Reserve jacked interest rates up to over 20% – This stopped the inflation crisis but triggered a deflationary plunge that would sit like a giant boulder on the chest of the American consumer and small business owners for years to come. My own grandfather lost millions in his trucking and freight company during the rate spike; many people lost their businesses and homes.

1 Comments in Response to

Comment by PureTrust
Entered on:

One more point that almost nobody looks at is the bank ledger on bank loans. Ask any bank CPA (if you can get him/her to answer honestly) what happens to the promissory note during bank loans. What they will tell you is that the promissory note is entered as a credit in the ledger, and is then withdrawn as a debit in the form of the loan money. Did you catch that? The promissory note is turned into money by the bank, so that the loan is really a creation of new money, and not a loan at all. When the bank does this, the new money created waters down all the money in existence, causing inflation. If the borrower didn't have to pay the money back over the years, it would be the people causing their own inflation. But because it is the bank causing the inflation, all the money ever borrowed by Fed-backed banks is what the banking system owes the people. Banking CBDC will totally disrupt any attempt by the people to get the money back from the banking system.