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I liked your post, but confess I don't understand the final conclusion, "There will be no winners in this country of the inflation/deflation debate except in ways that don't much matter." Certainly one's investing style changes depending on inflation or deflation. In deflation, you want to go with long-term Treasuries and in inflation you want to go short-term, possibly corporate which pay a little more.

Though a little inflation seems to be felt to be a good thing by many economists, a lot of inflation is terrible and worth everything to squelch, which is why Jimmy Carter asked Paul Volker to stamp out the inflation. The reasons for fears of runaway inflation are well known. There is the example of Germany after WW-I which led to Hitler and Brazil and other banana republics more recently. I believe it was Brazil that had inflation running above 1,000 percent for some years (A family member was designationed to watch over the families savings and would run from one bank to another to get the highest rates.). I thought we were headed in the same direction as Nixon had inflation that was thought to be worrisome, Ford's was worse, and Carter's was worse yet. It contributed to but was not the sole reason for Carter losing reelection (perceived growing unemployment, the hostages, and shutting down Western water projects helped him to defeat.).

Deflation, especially if it gets large, can certainly be a bad thing and contributed to the rise in global Communism in the 1930s and McCarthyism in the U.S. later. But I recall my father saying that the Great Depression wasn't so bad if you had a job.

If various economists are to be believed, the working man has been losing ground to inflation during Bush 43s tenure (The wealthy tend to do well in either situation - inflation or deflation. Witness the modern CEO who sees huge increases in their reward packages whether their company is profitable or not and get the "Golden Parachute" even if fired.). The interesting thing is that economically losing ground by workers doesn't seem to have created any significant social action, yet. I don't know the reason for this but suspect that the diversion of attention of the masses onto issues like abortion, gay marriage, whether "Under God" should be in the Pledge of Allegiance, and the like has helped alleviate anger over any loss of purchasing power. Of course, another possibility is that the worker isn't really losing ground economically, and that there is something wrong with the figures that say they are losing ground.

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