Confidence is the problem not simply deflation or inflation!
by Julian D.W. Phillips
The world is facing a buckling drop in the level of confidence on so many fronts. Bankers don’t trust each other, investors are fearful of further bad news. Financial systems have not been repaired and remain vulnerable. Local and global economies are shrinking and telling us the worst. Currencies are faring badly and we see Capital Controls creeping into several emerging economies now. How can we repair this damage? Bankers can only re-lend money, [under harsher credit criteria in an economically declining environment] reassuring customers that they are easy sources of money, but then businesses must respond. Businesses can only respond if they see sales and sales can only start if there are customers out there to buy. The last long period of growth relied almost totally on vibrant consumer spending and borrowing. So it is the consumer that needs to find his confidence and ability to spend repaired first. If this doesn’t happen, then all the efforts to put the global economy back on its feet will come to nothing.
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