Inflation Paradox : Close Window?
Our central bankers must have gradually learned that when Americans fear that deflation can be bestowed upon them, this symbolic anchor, as effective as Smith's Invisible Hand, worked for enacting policy. For deflation expectations produce demand for hard currency, and thus help buoy the value of the currency that "appears" the hardest. There are certainly several economic laws that will help you determine which currency that is, but the nation with the most widely circulated currency, and the most net debt, ain't gonna be it by default. However, should the foreign exchange rate of the dollar rise, for many of the unrelated reasons that we will touch on this week, investors will find it expedient to conclude a deflationary outcome. Indeed, that is what has been happening. And accordingly, deflation expectations have been on the rise.