SOS Peter Schiff

Peter Schiff argues that the printing of money by government will cause high inflation. (of course the CPI so far did not show much of inflation, however he argue that the purchase power of US dollar has drop, which is equivalent to inflation)

True

If the money flow into the economy system, i.e. cash for clunker, housing subsidy, money to build briges, roads, schools, etc (the deflationist arguement is that the economy already over debt and over consume, hence, it is not sustainable for such subsidy and bad for the economy.

False

If the money stays in the banks reserve as a result of recapitalisation of banks by buying up their toxic assets, by bailing out banks, recapitalising banks with guaranatees. In short, government is printing a lot of money but it does not enter the economy system, bank reserve only increases.

Neither

When government intervent the economy, as usual putting good money into bad investment, it will increase the price of that particular sector, such as medical/insurance etc. Just imagine, government is borrowing money (taxpayers) putting into industry that is incapable to payback back the loan and interest. In short, unproductive use of resources, not only human capital, as well as capital expenditure

So, his arguement is both RIGHT in a way, and also WRONG in a way, and also NEITHER wrong nor right.

MyView

The problems with inflationists and deflationists are mainly they will used a few of the conditions to make their arguement, which supports their views. Hence, the best way to validate their views is that both are given a sum of money to invest or short, and the RESULTS will speak for themselves.

Of course in a real world, both will happen in a certain way, it is a matter of intensitivity. So, follow the conditions made by MISH in the last blog and review how many have come true and how many that really convert their convictions into money making.