While the crowds were swept up in the fervor of asset bubble-driven inflation, they were forced to participate without choice. However, as the trend reverses, households, businesses, and financial institutions will be busy repairing their damaged balance sheets, leading to a decline in borrowing demand. At this point, the monetary policy transmission mechanism will break down, resulting in a typical debt contraction that may not escalate into the hyperinflationary hellholes of Zimbabwe, Venezuela, or theжене currency of China.
Therefore, the reckless practice of using the threat of inflation to justify participation in asset bubble markets, solely based on the printing of money and the injection of liquidity, is a hazardous approach. The logic of the debt cycle's first half does not apply to the second half. In other words, the prolonged and artificial suppression of interest rates, which is the hallmark of the unconventional monetary policy, will eventually fail to prevent the asset bubble from bursting.
This has crucial implications for investors. They must recognize that the much-hyped narrative of an elusive inflation apocalypse, often touted by self-proclaimed experts, is a fabrication. In reality,Inflateronycoords Market Distortions from Walter Schloss, untreated).
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