HappySqurriel on 30 October 2007
| MontanaHatchet said: It's a phase, really. Honestly, could you imagine having a stock market crash during the rise of a Nazi empire? And we're scared of inflation? It's really not that hard for the government to deflate, and the U.S. has gone through situations a lot scarier and more difficult than this. We'll see rapid inflation, people will take their pay checks, and then immediately go to the super market to buy 12 packs of ramen, packets of salmon, nuts and beans. We'll just have to start buying products we don't normally buy. So..... How about that Avian Flu? |
The real risk from inflation comes from it being at a high enough level for long enough that people start anticipating it and adjusting in anticpation of it ... Anything with implicit value (commodities, real estate, art) suddenly sees a dramatic increase in demand and prices increase and anyone who has any control over their income starts increasing it at a rate faster than inflation (in both cases pushing inflation higher).
Eventually inflation gets out of control and the only way to bring it back in line is to constrict the money supply to a "painful" level (typically causing a deflationary recession that lasts a long time) in order to eliminate the expectations of inflation.
