Monetary Tectonics – The interplay between inflation and deflation
* The natural market adjustment process of the current crisis would be highly deflationary.
* The reason for this lies in our current fractional reserve banking system, as the largest part of money in circulation is created by credit within the commercial banking sector. The much smaller portion is created by central banks.
* As the financial sector in most parts of the world reversed its preceding credit expansion, overall credit supply is reduced significantly.
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