This credit contraction has a long way to go

Those who recall the early 1990s - or even 1972 - will know just how painful a credit contraction can be. And following an unprecedented period of expansion, it may well be worse this time round.

Woody Brock, in his most recent memorandum, said that there is a real risk that incomes in America might fall and levels of unemployment rise.

This makes nonsense of the view that there is a genuine risk of inflation. We find it incongruous that there should be inflationary expectation at a time of credit contraction even though energy and food prices are rising.

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