Sunday, November 21, 2010


For some reason I don't clearly understand, a lot of people seem to think that "printing money causes inflation," but using credit doesn't.

But if global economic deleveraging -- the shared desire to reduce debt ASAP -- threatens to cause deflation, then surely global economic leveraging -- credit use and the creation of debt -- could have contributed to inflation. Or, probably contributed to inflation. (Or, must have contributed to inflation.)

Increasing debt contributes to inflation; Decreasing debt contributes to deflation. It is simple symmetry.

Related but irrelevant to the topic of this post: Deleveraging is deflationary because it draws money out of circulation. If we can reduce debt without drawing money from the spending stream, it will not be deflationary.

My proposal to print money and use it to pay down debt is such a plan. Oh, and it won't cause inflation because the new money is destroyed when the debt is repaid.

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