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I think our disagreement is on the likelihood of the Japan scenario, not on your argument for why it might happen.

And I think we're basically talking about the same thing when I say the need is on the demand side and you say overcapacity and debt. Companies do not need an influx of capital to produce more stuff: they need someone to buy what they already produce, and with most people having too little capital to spend, except by getting deeper and deeper into debt ("I owe my soul to the company store"), they can't spend.

Now, I think you're probably also suggesting, and I agree, that there is overcapacity compared to real needs. If people, who can't really afford extravagent living, stop living as if they could, then you see real deflation in non-essentials.

Most of us agree the economy is in much bigger long term trouble than the politicians admit. I tend to think we'll get stagflation not deflation, or deflation in non-essentials, with high unemployment, and inflation in essentials, such as health care, energy, and insurance. (And regressive taxes will go up.) In any case, throwing money at the rich is not going to fix anything, since the only possible reason for putting money in the hands of those who can afford to invest it is to provide working capital, and where capital is needed now is on the demand (or debtor) side.
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