clo,
re: "What happens when those using one credit card to pay another just don't bother anymore?"
Good question. That's the source of endless debate among bears: Will the result be inflationary, or deflationary?
Either way, it's a depression. A deflationary depression results from too few jobs, with money taking on elevated value and prices consequently plummeting. Deflationists think this will happen due to a credit crunch as the money supply contracts.
The inflationist camp disagrees, citing the "Helicopter Ben" Bernanke promise to throw newly printed, unbacked money from a helicopter, if need be, in order to ensure that there will always be enough money circulating to avoid deflation.
I'm in the inflationist camp, by the way, though I could envision a short-term, deflationary credit crunch . . . precipitating a broad inflationary increase in the money supply. That's not hard to imagine since that's exactly what we experienced over the last three years.
Money can ALWAYS be printed. Even if banks get tight with its release, the money will get out through other means. Sky-high prices will be the result.
Gold is $1,581/oz today. When it hits $2,000, it will be up 26.5%. Let's see how long that takes. - De 3/11/2013 - ANSWER: 7 Years, 5 Months
| 