The US Government Will Not Choose Deflation | Pacific Capital Associates

The US Government Will Not Choose Deflation | Pacific Capital Associates: "The US Government Will Not Choose Deflation

The modern-day monetary system employed in the United States is based on currency that can be created at the bureaucratic touch of a button. In charge of that button is a group of people with a firmly entrenched belief that deflation is the worst of all possible monetary outcomes.

We believe that this state of affairs is simply incompatible with the existence of the type of protracted 'deflationary spiral' about which it has become all the rage to worry. Deflation is a choice in the current monetary regime, and it is a choice that our government simply cannot make.

Before we explain our reasoning, let's deal with the definitional problem inherent in this topic. The word 'deflation' is used by some people to describe a generalized decline in prices. To others, the word describes a decline in the money supply. The word 'inflation' correspondingly refers to an increase in prices or an increase in the money supply, depending on whom you ask."