Now, however, the dynamic has shifted. All too likely now, the expansion of Treasury liabilities will prove inflationary in the physical goods realm. The only thing that could possibly stop this is investments in physical infrastructure capable of creating efficiencies (i.e. real wealth generating capacity) out-pacing the expansion of credit. Since Alexander Hamilton has a better chance of coming back from the dead than such a necessary massive investment has of being implemented these days in the United Casinos of America, the risk of physical goods inflation (affecting CPI) is all the more greater here.

Still, credit demand MUST expand. One might consider studying Wiemar Germany 1923 to see how this delicate balance between credit growth and credit demand was orchestrated. In other words, government agencies can spew off all the credit they wish to fill capital holes in financial institution balance sheets. Yet it seems if demand for credit beyond financial institutions does not grow, then a deflationary death spiral eventually must unfold. However, if credit demand somehow is expanded beyond financial institutions, then a hyper-inflationary blowout seemingly would become the greater risk…