Laurence Kotlikoff-Hyperinflation--Not Deflation Essay

Laurence Kotlikoff-Hyperinflation--Not Deflation - Essay Example The situation will set up a condition where the people have runs in various banks, for example in Italy, Portugal, and Spain. The situation may spread to all the other banks in the different countries Germany and France all inclusive.He is giving the example that occurred in the recent past, where Cypriot banks failed and claimed that they will not bail off the depositors. Despite the country being small with relatively two small banks, the circumstance led to a main panic in the international state of the economy. He is projecting that a daisy sequence of defaults besides numerous bank runs might end up happening in Europe. Dr. Kotlokoff sees a case where the financial crisis may spread to America. He insists that if only the people will be solvent and get their money out from the banks then the situation could stabilized He further warns that, if the people or the investors are running to the banks, everybody will want to run to get the money out instead all perish due to failure. The professor goes ahead to say that, with the plunging of the oil prices, the Russian banks are also seemingly at a significant risk. Questions are posed regarding the sustainability of the fiscal policy of Russia given the dropping the prices of oil. There is evidence that about 40% of the Russian revenues come from the sales of oil. Therefore, there is a concern over the oil prices that may result in failure of the Russian banks as well. He points out to the failure of the Russian banks in 1998 holding that there were eminent concerns regarding the printing of huge amounts of the government money. It is clear from the clip that there are concerns about the demand deposit of insurance in the USA. The FDIC insurance of the United States is said not to be a real insurance given the case where almost everybody has apprehensions about inflation. He then gives an example that, if he knows that the prices of commodities are going