Flash Point: The Other Side of the Coin

So often in economic commentary, the pundit focuses on an aspect of an issue, apparently totally oblivious to the fact that he is looking at one side of a coin. As an example, many doomsayers like to propose the idea that the China can somehow sell its Treasuries and destroy the US. The fact is if they sell, someone else has to buy. The Treasuries are still owned by someone. Is the Treasury threatened? Probably not. Do they care who the owner is? Probably not.

Perhaps one of the most common economic coins is the bond. This coin is not misunderstood. Heads the yield goes up, tails the price goes down. But today we started entertaining another one. We hear constantly that money printing is inflationary and we agree with this idea. But the other side of the coin is that the value of the money deflates proportionately. Since almost all debt can be considered to be money with a non-zero maturity, the value of all debt deflates.

We suppose the issue is not so much that every action has an equal and opposite reaction – certainly a bilateral event – but that every action has that which is acted upon. All events are bilateral. When you argue a point, what is the bilateral consequent?

Remember: every coin has two sides.

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