Inflation and Credit Crunch

[sipanivishal]

Hi David,

A question just cropped up in my mind.How can credit crunch and inflation exists together ??

Thanking You
Sipani

 

[David Harper CFA FRM]

Hi Sipani,

On the demand side, I don't see how it could. But i think the worry (by some) is the money supply "offset"; monetary policy as itself inflationary. Bernanke famously said he'd print money to avert deflation. The bailout is a different goal, of course, but i think the argument is that the US govt, becoming even more of a debtor, prints more money and devalues the dollar. David

 

[David Harper CFA FRM]

....in my blog reader today, on deflation: http://blog.tomevslin.com/2008/10/deflation-pri-1.html And, .even better, his follow-up on asset bubbles and deflation: http://blog.tomevslin.com/2008/10/dont-catch-fall.html

David