Sometimes, Money Printing Sets The Stage For Lower Prices

Not all printing is inflationary.

I know, what I have just said must resonate as nothing short of heresy amongst most of your ranks.  You’ve been worshipping at the altar of currency devaluation for so long now you probably can’t even begin to fathom life without the dogma.  What would you do, if separated from your ceaseless chanting and repetitious arguments?

But I’ll say it again; not all money printing inevitably leads to higher prices.  Sometimes, money printing sets the stage for much, much lower prices.

For instance, look no further than the U.S.’s own banking system.  There is to be witnessed the very contact point for where all this currency is going.  It is the direct beneficiary of free money.  Yet, how are things faring for them?

Revolving credit, the kind you usually find most prevalent with business, is dropping consistently.  While perhaps the numbers of U.S. dollars in circulation is forming a record apogee, the velocity of money continues to drop.  Banks have fewer and fewer outlets to invest all that free money into.

I say this to remind you that the issues of the day are never as straightforward as they initially appear.

Now, the oil/energy market has for months been going on a run of epic proportions.  And if you think our run has been impressive, you should look to Europe to see true calamity.  In anticipation of the great devaluation at hand, it seems there is no price too great to secure escape.  Gasoline prices in particular have been soaring, while Europe’s economy contracts daily.

How’s that for the worst of all possible outcomes?

But that sort of thing doesn’t last forever.  You can’t have economic contraction and soaring prices for long.  Eventually, this sort of contradiction forces the reluctant choice: let the obligations sort themselves out and take the hit.

Especially with prices where they are right now, and the unwillingness of employee salaries to rise equitably, I would not be surprised to find that current price levels are a temporary phenomenon.  If governments attempt to subject their citizens to these prices, then demand will continue to collapse (as it has to this point).  

At that point, it will become a fairly clear choice of allowing the main players to take their lumps, or allowing a double dip recession and having the main players fail anyway.

We’ve reached the point where every dollar printed goes straight to commodities or stock prices.  That’s the end of the game, folks.

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