Economically speaking, inflation is like heroin addiction. The ‘highs’ are enjoyable, even exhilarating, when bubbles inflate and the good times roll—but underneath the surface, the health of the system is wasting away. Just as the addict has to suffer the wrenching pains of withdrawal in order to recover his physical health, so our economy needs to endure the short-term pain of a deflation in order to purge decades’ worth of malinvestments, uneconomic patterns of production, and unfathomably massive amounts of unpayable debts.
We must distinguish between benign deflation and traumatic deflation. The U.S. economy is a dead man walking—a zombie on life support, if we don’t bite the proverbial bullet and go through a painful cleansing, a healing period of deflation, the ultimate price we pay will be even worse. Like the heroin addict who can’t kick his habit and eventually overdoses, someday the Fed will go too far in its inflationary policies. It will ignite a hyperinflation, thereby annihilating the dollar, wiping out the country’s capital—not to mention, the savings of the middle class—and totally collapsing the economy.
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