The 1930s Great Depression was a deflationary depression. I have heard talk that the next Great Depression will be an inflationary depression. I heard this (and discussed it) many months before the Federal Reserve dropped interest rates (with the subsequent market movement toward protection against inflation).
Now I am once again trying to get my mind around this idea and trying to understand how an inflationary depression would potentially play out. From what I have read, Ben Bernanke was a student who studied the Great Depression and is trying to prevent it from happening again. The question is: will the cure end up being worse than the disease? Can reducing interest rates prevent a severe economic downturn while still maintaining international currency stability?
Stay tuned.
1 comment:
If you are really interested in what inflationary depressions are, read about the German hyperinflation of 1922-23.
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