Deflation Cycle: Currency Wars Will Only Get Worse
When massive private and public sector debts result in a credit collapse and recession, the efforts to pare down the debt is deflationary. Measures to inflate our way out of the situation are likely to fail as households are attempting to pay down debt and increase savings, rather than start a new round of debt accumulation. In addition, financial institutions are willing to lend to only the strongest borrowers, another factor limiting credit expansion.
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