"INFLATION OR DEFLATION
An Interview with Bud Conrad
- The Casey Files - by Louis James
April 8, 2008
The following interview, conducted by Louis James, a senior analyst and editor with Casey Research, appeared in the March 08’ edition of Casey’s International Speculator.
Louis James (LJ): The first question we think most readers will want to know about is this: if the U.S. is headed for recession – if not already sliding into one – do you really think we’re facing more inflation in the near future, or could falling spending power cause deflation?
Bud Conrad (BC): There are strong deflationary pressures in a credit collapse because as housing prices drop and defaults rise, some of the ability to buy new items is lost. Traditional analysis suggests that we could have deflation such as that which occurred in the Great Depression in the U.S. in the late 1920s, early 1930s. I would point out, however, that in the Great Depression the dollar was linked to gold, limiting the amount of money printing that could be done, a limitation that does not exist today. In addition, with $100 oil it is hard to argue for deflation. My base prediction is that we are heading into an inflationary period.
LJ: If there was any doubt about inflation vs. deflation, has it been settled by the central banks of the world as they responded to last summer’s credit crunch with greater liquidity?
BC: Yes. That is the point. The governments and their central banks have no limit on how much money they can create since there is no tie to gold or anything else. It is only logical to expect them to take the easy road and print money. The result is predictable. New government bailouts for whatever problems arise are going to continue.
LJ: With war spending, ballooning entitlements, a crisis of confidence in the U.S. financial system stewing, along with many other woes, do you think there’s any chance that the U.S. will not try to inflate its way out of its current economic predicaments?..."
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