Looping Deflationary Capacity

Got a bet there?
I can meet it.
Gettin' high?
You can't beat it.
--The Who

Taken from this interesting article, not a bad way to think about how central bank money printing leads to deflationary conditions.

QE and ZIRP drive yields lower which causes investors to pile into risky assets. In the near term, this funds even junkiest of borrowers and drives excess capacity buildouts (e.g., shale oil). Commodity prices decline because of increase supply.

Rinse and repeat.

Causal loop diagrams such as the one above helps explain why CPI has not rocketed higher in the midst of epic money printing. Price increases have been limited to risk assets in true Cantillon Effect fashion.

It also explains the reinforcing cycle that building leverage in the system for an epic deflationary bust.