EDITOR'S NOTE: Inflation seemed to have taken the American public (and, strangely, the Federal Reserve itself) by surprise. Although the Fed was aiming to stimulate inflation to an average of 2%, the central bank somehow overshot its mark. Now it’s in a dire position to hit the brakes and reverse course. But what if the Fed, similar to what it did with inflation, ends up overshooting its mark again, this time bringing the economy crashing down to deflation? Are Americans prepared for a deflationary environment? There’s plenty of expert speculation that this might be the consequence of the Fed’s current actions. In the video you’re about to see, George Gammon explains how the “wealth effect” will play a significant role in crashing the economy. He also claims that the Fed, mired in its own labyrinth of models and calculations, fails to understand how the wealth effect works and its practical significance in the current context. Gammon then explains quite clearly why an economic plunge is likely to happen, and how the Fed’s “neutral rate” model has a lot to do with it. If inflation took you by surprise, don’t let the probability of a deflationary plunge leave you facing the wrong direction.
Source: George Gammon via YouTube
Originally published by George Gammon on YouTube.