Crack Up Boom?

A chart by Callum Thomas showing projected credit growth based on easing credit standards is in line with a boom, and an inflationary one at that. See Credit Growth About to Surge.

I was talking with a really cool gentleman who runs a gold oriented hedge fund a couple days ago and we both agreed that deflation is the favored outcome or from my perspective, the more natural and consistent force against which policy makers (monetary and in their own way, fiscal) inflate the system.

So whether you want to call it Marty Armstrong’s Sling Shot or Von Mises’ Crack Up Boom, the case for a non-benign inflation exits and it is rooted in debt. From the linked article…

Today’s fiat-money regimes are characterized by ever-greater amounts of debt relative to real income — caused by policies that try to solve the economic problems caused by credit and money creation out of thin air by using even greater amounts of credit and money created out of thin air. And it is fair to say that the higher an economy’s overall debt level is, the more likely hyperinflation becomes.

Well, whether it is government debt or relaxed standards in private debt, it does not look like its creation (i.e. credit) is going to stop any time soon or until it is stopped… by yup, deflation.

That’s my take anyway, and it’s a good part of the reason why we cannot just assume bearish outcomes in any kind of convenient time frame. Until the debt is stopped, the boom will boom. But it’s gonna be inflationary to varying degrees (milder as now, and potentially extreme) as long as it runs.

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