Deflation is a much more likely outcome than major inflation
We have long maintained that a debt bubble followed by a credit crisis leads to a deflationary recession or depression and a major secular bear market. Nevertheless, a lot of smart analysts who agree with us on the existence of a secular bear market argue that actions taken by the monetary and fiscal authorities lead to severe inflation rather than deflation. While their case is logical and well-reasoned, we disagree as we will explain in this report. We emphasize, however, that, in either case, the result is a major lengthy bear market.
When a debt bubble bursts, the need to pare down the debt to more normal levels (deleveraging) can be accomplished through either inflating the way out or paying it down. A third alternative----declaring bankruptcy and writing the debt off----is so drastic that it would happen only if and when the first two alternatives were to fail.
Visit Comstock Partners site for charts and the balance of their report:
Special Deflation Report