Credit collapse=Deflation and dollar strength...but then what?

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johndaniels's picture
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Credit collapse=Deflation and dollar strength...but then what?

One thing is for certain, as we are seeing today...The credit system is collapsing. It started with the housing bubble, and is now working into consumer cc spending (down) as incomes stagnate and consumers stop valuing their credit report numbers and start emphasizing survival. The banks will be left with that tab, and will react by further reducing available consumer credit; probably amidst bank runs as people violently retract from the government tentacled system. The convenience of credit cards is going the way of the dinosaur; bringing the expansion of "prepaid" credit cards. Where things go from there; who knows? The dollar should remain the worlds currency, and even trend stronger TEMPORARILY with the reduction in credit money as expressed in dollar strength. All this with the dollars fundamentals of hyperinflation clearly present. The system is truly in chaos; it is an insane beast with no concept of reality. It is such a discombobulated system, entailing both inflationary actions and deflation via credit suppression, that noone can predict outcomes with any accuracy. The "true" circumstance is hyperinflation, because credit money is not real money.
One must consider there is a threat of a global currency collapse, because nothing can replace the dollar. This is where movable, hard value assets like gold and silver would come into play; when the strong-dollar deflation metamorphosizes into a rapidly declining currency and we get a simultaneous effect of inadequate asset valuation to the dollar and other currencies following the dollar to oblivion. If deflation is expressed in dollar strength, yet the dollar is fundamentally flawed and has 10 trillion in debt, 53 trillion including entitlements, and bailouts, FDIC shortages, etc.then we need to grasp reality; deflation will be a short term effect of the eventual collapse; because as the credit system fails, everything will come back to hard values. This is inded a perfect storm; rates having to be held low yet dollar hyperinflation with debt and bailouts...any thought on this?

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