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Too much debt causes deflation, not inflation

Ingredients for a depression still linger

Author Don Peters August 7, 2009 at 5:41 PM
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Deflation can be a problem




J Guarino

J Guarino

May 28, 2021 — 6:31 PM
Well you were not correct and it is 2021 , so can you explain what happened to change your projected course of the economy and the stock market? It was not flat as the plains of Kansas as you said. It was more like the slopes of mount Everest. So I think it would be instructive to chat about how one trajectory can change course so much.
brooke southall

brooke southall

May 28, 2021 — 6:39 PM
Mr. Guararino, It seems that this article was pretty prescient! We've hardly seen a whiff of inflation the decade-plus since it was written until a few wisps now. This line from the Peter article explains the shift: "Deflation is a reduction of the general price level in an economy. It results from an oversupply of economic goods relative to demand and right now supplies of everything from cars and houses to flight capacity and human labor are outstripping the demand for them." Right now we have an undersupply related to chips and a pandemic that took some capacity offline. Will that continue?
Jeff Guarino

Jeff Guarino

May 29, 2021 — 7:49 PM
Well yes on the economic recovery. But quote: We believe the markets, both stock and bond, have yet to reflect this inconvenient truth in their values. Recently we have seen a decent recovery in stocks as well as in less than AAA quality bonds. In our opinion, these market recoveries are fleeting and much overvalued. He said the recovery in the 2009 stock market would not last, "fleeting" How is that prescient????
brooke southall

brooke southall

May 29, 2021 — 8:27 PM
He was right on interest rates, inflation and bond prices. He's a bond guy. I recall talking to him. He had a hard time imagining all that debt wouldn't catch up with stocks.

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