Credit, No Credit

With hours left time on our sides
Now it's fading fast
Every second every moment
We've got to--we've gotta make it last
--OMD

Frank Shostak suggests that those equating a decrease in overall credit with deflation are wrong. He argues that only a decline in 'unbacked' credit reflects a deflationary condition.

While this may be true, the capacity of financial institutions to pyramid capital 10 to 1 or more suggests that the bulk of credit outstanding is indeed of the unbacked variety.

Indeed, bank leveraging lies at the heart of the inflation engine. When deleveraging occurs, the engine works in reverse.