Comments for "Inflation vs. Deflation"
Nemo says:
The Fed is driving a car that started out swerving slightly to the left, so they turned the wheel hard right...
Nemo Fri Apr 3 21:10:31 2009 CDT #
Hymns for the Lord says:
Nope - it's "credit", not "quantitative". That means they've attached an elastic band to the wheel and it has been stretched taut but not yet been let go. As long as the car returns to straight ahead, there's no problem. If something unfortunate occurs and the band is snapped (say oil goes through the roof in price), we'll fall off the road as the car swerves in response.
Parent Post
Hymns for the Lord Fri Apr 3 23:59:51 2009 CDT #
Anonymous says:
and now we learn the truth about Brad Setser
*"Full disclosure: I worked for Mr. Geithner and Mr. Truman from 1998 to 2000.
http://blogs.cfr.org/setser/2009/04/03/the-london-summits-real-achievement/
Anonymous Fri Apr 3 21:12:31 2009 CDT #
Lucifer says:
Isn't that the speech which made Ben Bernanke into "Helicopter" Ben?
Lucifer Fri Apr 3 21:16:26 2009 CDT #
Punditry says:
I need to think about this.
Understatement of the year!
Punditry Fri Apr 3 21:17:01 2009 CDT #
EvilHenryPaulson says:
Simpler way to look at things:
- What happens if there is deflation
- What happens if there is inflation
Mostly the same result
EvilHenryPaulson Fri Apr 3 21:19:05 2009 CDT #
Lucifer says:
CR,
Do you still belive that these morons have a clue about the limits of their abilities?
The problems is that they think that they understand the problem, when in reality they can only see a small part of the problem.
Lucifer Fri Apr 3 21:20:55 2009 CDT #
Anonymous says:
The track record would suggest they don't. They are not controlling the situation but reacting to it. It comes down to trust or lack thereof.
Do you trust them to have the wisdom, resources and backbone do unwind this in a timely fashion? I don't.
Without questioning their good intentions, if they head off the crash the hangover will be INFLATION.
Parent Post
Anonymous Sat Apr 4 14:47:29 2009 CDT #
Lawyerliz says:
Can you think about this?
No flation.
In or de-.
Flation is bad.
We're gonna inflate, and then we're gonna take it all back again?
Liz scratches head and then reaches out into the void and scratches CR's head too. Liz does not scratch anywhere near where nova scratches.
money is losing its symbolic meaning.
Lawyerliz Fri Apr 3 21:21:03 2009 CDT #
Dope Alert says:
Did'nt the entire episode from the 2003 low to the market top of 10/07 kinda prove that asset price targeting is mostly flawed?
Dope Alert Fri Apr 3 21:21:34 2009 CDT #
Thomas Jefferson says:
I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.
Thomas Jefferson Fri Apr 3 21:21:42 2009 CDT #
reptillian says:
The Fed has a simple formula:
inflation + deflation = 0
I should say that this is what they're working with, or believe, or hope to achieve.
It works like this: a certain amount of deflationary pressure can be cancelled (neutralized) with an equal and opposite inflationary pressure. Didn't one of Newton's Laws concern itself with that? Oh! wait! ... Newton was a physicist, not an economist.
reptillian Fri Apr 3 21:22:16 2009 CDT #
sportsfan says:
CR, I'm glad you're thinking about this on a Friday night, because some of us have already had a drink.
sportsfan Fri Apr 3 21:22:42 2009 CDT #
Comrade Bear (tj and the bear) says:
They're still trying to have their cake and eat it too.
Doesn't matter. There was never any doubt that (a) we would see ZIRP and (b) monetization; next up is (c) the demise of the dollar. The only question, as always, is when.
Comrade Bear (tj and the bear) Fri Apr 3 21:22:50 2009 CDT #
Hymns for the Lord says:
The demise of the Dollar is not in the hands of America(ns). It really depends on how the Chinese decide to play their hand. I doubt Obama can convince them to do something different if they decide it's not in their self-interest.
Parent Post
Hymns for the Lord Sat Apr 4 00:08:06 2009 CDT #
Lawyerliz says:
Ok, Jeffy, what does that last sentence mean?
Lawyerliz Fri Apr 3 21:22:53 2009 CDT #
Lucifer says:
I have been saying that for some time, we require a new concept of money, jobs, consumption, economy etc.
We will get there one way or the other.. though some ways are more painfull than others.
"money is losing its symbolic meaning."
Lucifer Fri Apr 3 21:23:28 2009 CDT #
Lawyerliz says:
If the pressure on a balloon is the same on the inside and outside, what happens?
Nothing.
Lawyerliz Fri Apr 3 21:24:24 2009 CDT #
EHP says:
http://realize.org/cr/crcizer/phpCRCo.php?path=/1714231527182234491&ord=asc&csslayout=reg&topic=Inflation+vs.+Deflation
CRCizer link --^
EHP Fri Apr 3 21:25:05 2009 CDT #
MrM says:
"a determined government can always generate higher spending and hence positive inflation"
I guess the Japanese government has not been determined enough
Unstoppable force (the Fed) meet the immovable object (massive deleveraging)
MrM Fri Apr 3 21:25:39 2009 CDT #
Anonymous says:
Summers’s $2.7 Million in Speech Fees Included Banks
April 3 (Bloomberg) -- Lawrence Summers, director of President Barack Obama’s National Economic Council, took in more than $2.7 million in speaking fees paid by organizations that included Citigroup Inc., Goldman Sachs Group Inc. and Bank of America Corp., among other companies now receiving taxpayer funds in the economic bailout.
Summers also was paid more than $1.4 million in salary and over $3.7 million in other compensation by the investment firm D.E. Shaw & Co. in the past 16 months, according to financial disclosure forms of top White House officials that the administration made public today.
http://www.bloomberg.com.au/apps/news?pid=newsarchive&sid=amujoxo_s_EA
Anonymous Fri Apr 3 21:26:21 2009 CDT #
Hymns for the Lord says:
These people have steered the ship of state aground. Noone could possibly want their advice for its intellectual substance. The only alternative I can conceive is that these multi-million speech payments are poorly veiled bribes for future favors. Why don't these conflicts-of-interest bother Obama or the masses enough for them to act? I realize this sounds naive but am curious if anyone can lend more color to my understanding of the politics involved.
Parent Post
Hymns for the Lord Sat Apr 4 00:14:16 2009 CDT #
Mad Mullah says:
Maker's Mark.
End of discussion.
Mad Mullah Fri Apr 3 21:27:21 2009 CDT #
Noble says:
Oh come on! Bernanke also stated explicitly his 2% inflation target recently until Volcker took him to task for saying that. Volcker on the other hand would have preferred to have said that the Fed is supportive of a stable currency and stable employment. Hence the coinage of the new term credit easing.
You know how the story will play out. They'll let inflation ride until they are absolutely certain the patient doesnt need to be in the ER anymore. Then they'll try to retract their monetary "easing" - the method is which this will be easily retracted is still fuzzy to me. Regardless, by then it will be too late. The inflation genie will be out of the bottle. And THEN, they'll ask Volcker to save their ass again! Jesus. Dont we ever learn?
Noble Fri Apr 3 21:29:09 2009 CDT #
Hymns for the Lord says:
You do remember Volcker's age, yes?
Parent Post
Hymns for the Lord Sat Apr 4 00:16:09 2009 CDT #
Darth Paulson says:
You can't use monetary policy to control the velocity of money outside the normal highways(between the Fed and banks).
That is the domain of fiscal policy and tax laws.
When people are watching their friends and neighbors losing their jobs....they are gonna wonder if they will be next. This doesn't exactly make them want to spend money....irregardless of what the Fed is doing or threatening to do.
Our fiscal policy....broad, large, sustained....fiscal spending....preferably in capital neglected areas of the the boarder economy...can achieve continued economic growth or at least provide relief for deflating parts of the economy(hopefully the parts which were previously overcapitalized(financial!)).
Darth Paulson Fri Apr 3 21:29:11 2009 CDT #
ATM card and $19 in the bank says:
Isn't this where the tax code comes in?
Some suggestions: Restore the deductibility of credit card interest, allow use of IRA money for a significant downpayment on a personal residence, ease the use of IRA funds to start a business; and on the other side of the ledger, tax carried interest as ordinary income, restore the old-fashioned "prudent man rule" for tax-exempt institutions and levy taxes on gains produced by portfolios that exceed prudent risk profiles, and lift the cap on FICA.
The results: more consumption on credit, more small business formation, potentially a floor under housing prices; higher percentage of tax collected from the highest earners, less systemic risk due to pension funds and endowments chasing alpha, and more tax revenue flowing toward the looming Social Security deficit.
ATM card and $19 in the bank Fri Apr 3 21:30:00 2009 CDT #
Anonymous says:
Dope Alert says:
Today, 10:21:34 PM
“Did'nt the entire episode from the 2003 low to the market top of 10/07 kinda prove that asset price targeting is mostly flawed?
duhhh...
Anonymous Fri Apr 3 21:30:24 2009 CDT #
debtinator says:
Is this a physics blog?
debtinator Fri Apr 3 21:33:51 2009 CDT #
Alo says:
test
Alo Fri Apr 3 21:34:16 2009 CDT #
MrM says:
"Under a paper-money system," Bernanke explained, "a determined government can always generate higher spending and hence positive inflation."
Is it the same Bernanke who said in May 2007 that "the subprime mess is grave but largely contained" and that "“Given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited” ? Here is the person I can trust!
MrM Fri Apr 3 21:34:29 2009 CDT #
Lawyerliz says:
Sure. :) :-E >:o
Unless you want it to be a theology blog.
Lawyerliz Fri Apr 3 21:35:05 2009 CDT #
jo6pac says:
I'll be back for your thoughts CR, this is something that as some one with very little is racing against. Yes both of the evil $.
jo6pac
jo6pac Fri Apr 3 21:36:27 2009 CDT #
Lawyerliz says:
They don't know what they are doing. Nobody does.
Future financial types (if there are any) will study this period closely.
Lawyerliz Fri Apr 3 21:36:32 2009 CDT #
Alo says:
S&L investigator calls this whole thing fraud:
http://www.pbs.org/moyers/journal/04032009/profile.html -click watch video link
Alo Fri Apr 3 21:36:34 2009 CDT #
MrM says:
Is the commenter Alo "the" Andrew Lo?
MrM Fri Apr 3 21:36:49 2009 CDT #
Anonymous says:
Beware Bean Counters' Changes
When an accounting rule is loosened, it is worth tracking which companies profit
Dow Jones & Company, Inc.
http://online.wsj.com/article/SB123880085634588515.html
Anonymous Fri Apr 3 21:37:19 2009 CDT #
debtinator says:
Great question in cosmology: inflation or deflation.
debtinator Fri Apr 3 21:38:00 2009 CDT #
Don says:
Am I to assume that when speaking of inflation expectations (that is, producing the expectation, and as a result the material reality of inflation), the target audience is investors, money managers, etc.? Or, is it also directed to the public?
If the public, then are we to expect that since they expect prices of goods and services to rise, they will then spend now so as to avoid higher costs later? If this is so, then does it not assume also that they have the money to spend on goods and services at such a quantity that the expectation materializes into inflation, in that they spend more, with higher consumption leading to more production and thus also higher prices? But this ignores one crucial factor: from where will the higher incomes come from to provide the incentive to spend more? This is the Catch 22: there will be no increase in consumption without an increase in income. Merely rising expectations won't go far in inflating without rising incomes, which aren't about to materialize unless there is the need for more goods and services, which results in an increase in jobs and lower unemployment and more money in the pockets of consumers to spend. Note the circular reasoning here?
Don Fri Apr 3 21:39:23 2009 CDT #
MrM says:
Great question in cosmology: inflation or deflation.
In cosmology we are guaranteed to have fairly stable inflation for the next few billions of years. By the time it might change to deflation, the 13th tribe will have found the Earth.
MrM Fri Apr 3 21:40:42 2009 CDT #
Lawyerliz says:
Yep. As I posted before, in the 80s we got decent raises. Didn't quite meet inflation, but they were raises.
Lawyerliz Fri Apr 3 21:40:48 2009 CDT #
longwaver says:
My take...
We will have nasty inflation of the currency while most US based assets deflate due to the lack of demand / lack of cash buyers.
A house will be worthless, but a 2x4 that can be easily exported might be $10.
This incents everyone to hock everything in this country that isn't tied down until enough debt is repaid to restart the US economy. Once the economy starts to grow again, asset prices rise and soak up all the extra cash to halt the inflation.
Although right now Obamarama is running the printing presses overtime, so he will add years to the recovery. I expect the government shenanigan to stop once the currency inflation kicks into overdrive.
Everyone is going to be pissed with $10 a gallon gas. The news will start to talk about everything in terms of another currency so that the world markets can have a stable point of reference.
X euros / barrel of oil or X Yuan / ounce of gold.
Paybacks are a bitch.
longwaver Fri Apr 3 21:41:00 2009 CDT #
Anonymous says:
Fannie, Freddie Plan to Pay $210 Million in Bonuses
Washington Post Staff Writer
Saturday, April 4, 2009; Page A12
http://www.washingtonpost.com/wp-dyn/content/article/2009/04/03/AR2009040303061.html?hpid=topnews
Anonymous Fri Apr 3 21:43:05 2009 CDT #
Comrade Coinz! says:
<i>
reptillian says:
Today, 19:22:16
"Oh! wait! ... Newton was a physicist, not an economist."</i>
From Wikipedia:
Newton moved to London to take up the post of warden of the Royal Mint in 1696, a position that he had obtained through the patronage of Charles Montagu, 1st Earl of Halifax, then Chancellor of the Exchequer. He took charge of England's great recoining, somewhat treading on the toes of Master Lucas (and securing the job of deputy comptroller of the temporary Chester branch for Edmond Halley). Newton became perhaps the best-known Master of the Mint upon Lucas' death in 1699, a position Newton held until his death. These appointments were intended as sinecures, but Newton took them seriously, retiring from his Cambridge duties in 1701, and exercising his power to reform the currency and punish clippers and counterfeiters.
Comrade Coinz! Fri Apr 3 21:45:04 2009 CDT #
Starbucks says:
Sen. Bond calls FHA a “powder keg”
Some politicians think the Federal Housing Administration is the solution to the nation’s housing problems. Sen. Christopher Bond, R-Mo., thinks it’s a “powder keg” that could explode if Congress keeps pushing it to relax lending standards.
Bond issued a statement for a subcommittee hearing today on the FHA. In it, he says:
The health and solvency of FHA is at high risk. There are very troubling signs. FHA default rates are at its highest rate in several years. FHA’s economic value had fallen by almost 40 percent over the past year. … Fraudulent activity in the mortgage industry is on the rise exposing FHA to more risk. In addition, FHA has seen a significant increase in foreclosures, which endanger the stability of communities and neighboring homes. The rise in FHA defaults and foreclosures, especially in areas already victimized by subprime lending, threaten to make a bad problem worse.
… The alarm is sounded – if Congress and the Administration place more risk on FHA before the problems are solved this powder keg will explode and taxpayers will be on the hook.
http://www.stltoday.com/blogzone/mound-city-money/us-economy/2009/04/sen-bond-calls-fha-a-powder-keg/
Starbucks Fri Apr 3 21:46:54 2009 CDT #
Noble says:
Here's what I am curious about. The banks lost a lot of money, yes? Who won? Where did all that money go? Been curious about this for a while.
Bernanke's argument only holds if money was actually DESTROYED by the housing collapse. But when you borrowed money to spend on that new kitchen that money went to Home Depot and then to the Chinese. It wasnt destroyed. When Paulson bet against sub prime - the money went to Paulson - it wasnt destroyed. So I repeat my question - Where did all that money go?
Noble Fri Apr 3 21:48:53 2009 CDT #
EconDude310 says:
good question Noble...
in a fiat monitary system, all money is borrowed, ( that is all money is debt backed). money is not created when the fed creates reserves, but when joe sixpack, (or his employer Joe's plumbing, Inc.) borrows it from his local bank. once the borrowing stops, loans start getting paid back or defaulted on, money is destroyed.
nobody is borrowing now. houses are still too expensive if you don't already have one, people are losing jobs, companies are shuting down, and nobody wants to borrow in this environment. (esp not to spend)
also in the case of banks, much of the losses weren't losses of money, but the assets they held lost value. assets can lose significant value (50%) or more, with only a tiny fraction of those asset actually trading.
Parent Post
EconDude310 Sat Apr 4 02:00:39 2009 CDT #
Anonymous says:
1. If Bernanke says he wants inflation there go long term rates higher, there goes the dollar down. So, he can't say it.
2. He can say he wants to unwind, but I have seen no credible way that he can achieve this. He somehow has to be able to offload all this paper onto someone when there will already be so much paper around (and at what price).
Bernanke can say what he wants, what is possible is another thing.
Anonymous Fri Apr 3 21:52:13 2009 CDT #
Tom Stone says:
Leaving aside the rest (I only have 1500 sq ft here) this plan depends upon BB's credibility.game over.
Tom Stone Fri Apr 3 21:54:24 2009 CDT #
Ye Olde Death Spiral says:
I heard on the radio today...
To put things in perspective. Today's jobs report is the equivilent to the entire city of Los Angeles' working population.
Food for thought.
Ye Olde Death Spiral Fri Apr 3 21:54:43 2009 CDT #
PonziMCC says:
wtf! Laboratory for Financial Engineering
they need a friggin laboratory to bullshit us, to make mtf more pallatiable?
PonziMCC Fri Apr 3 21:54:48 2009 CDT #
MrM says:
From recent GS report:
Mark to market - the bark does not seem to match the bite
<< Mark to market is not the bottom Our views on banks do not change following the FASB mark to market rule changes. Our core view is that banks will not bottom until nonperforming asset growth decelerates. All of the data points we track in 1Q point to acceleration.
Mark to market accounting changes provide banks with a little bit of Tier 1 capital relief, less earnings volatility from securities impairments (OTTI) as banks now estimate the credit loss rather than take the mark to market charge, and maybe more flexibility in putting assets into Level 3 and marking to model.
Against that, however, we note: (1) investors are not focused on Tier 1, (2) for securities, ultimately the losses are what the losses are and if the bank is wrong it will come at a later date, and (3) we believe investors will look through increases in tangible common at the expense of a big increase in Level 3 assets. Also, to the extent that banks do mark up risky securities it will make PPIP even harder to execute. >>
Morgan Stanley says
<<Impact on our views: We view the new FASB rules as a small positive to LC bank stocks for two reasons: 1) they could reduce volatility of future earnings, and 2) they could reduce potential declines in regulatory capital. However, we do not anticipate banks moving assets from Level 2 to Level 3 and realizing mark-to-market write-ups.>>
The Congress has one more egg on its face for having interfered with basic business rules.
IASB rejected the change.
So, why exactly did ABA lobby so hard for this change??? Are Goldman and Morgan Stanley just blowing smoke cover?
MrM Fri Apr 3 21:55:30 2009 CDT #
longwaver says:
@Nobel
I don't think any of the money has been destroyed. Just moved around.
The only way I can think of money actually being destroyed is if people destroy it. Go burn a $20 tonight.. destroyed..
If the government put a $500B tax on income, then erased the entry.. Poof.. Gone..
Otherwise I think it's all sloshing around out there.. Mostly sloshing into treasuries these days.
longwaver Fri Apr 3 21:56:14 2009 CDT #
PonziMCC says:
y, that's horrendus spelling ...who givesaf.
i'm busy developing a website to channel the inner rage of homicidial nitwits and focus their rage on bankers of note.
PonziMCC Fri Apr 3 21:56:44 2009 CDT #
EvilHenryPaulson says:
it always plays out the same
Let's say Bernanke continues on his present course of trying to print his way out. One day his fat fingers punch in $5 trillion instead of $0.5 trillion -- finally the Fed gets ahead of the credit unwind. So he repeats it for a few more months. Then there is actual inflation: wages, housing, food, energy, etc.
It comes to a point where there is not just private credit growth, but rapid private credit growth. Inflation is taking off even though Bernanke hasn't touched the magical box for weeks! Jawboning is only met with laughter! He can't unwind the Fed's balance sheet because there is no market for worthless junk, or at least the market for the worthless junk the Fed stores pales in comparison to the amount of money that needs to be withdrawn to restore price stability.
Super Bernanke does the unthinkable; no longer will credit break his neoclassical models! A ban on all new credit! Hyperinflation is defeated despite the encumbered balance sheet everyone warned him about. Hurray!
At which point discretionary (investment) capital flees the USA to other jurisdictions that have their financial systems in regulated, above board markets. Capital flight drops the USD, inflation is imported, and we haven't left the systematic re-calibration
The debate referencing deflation (or hyper-deflation as our system has no auto-stabilizers against deflation so they are one and the same) or hyper-inflation is puerile.
The debate ought to be is the global economic system in a stable region, representing indefinitely sustainable production.
If you spend all your life trying to answer a question without success, might I humbly suggest you are asking the wrong question(s)
EvilHenryPaulson Fri Apr 3 21:57:50 2009 CDT #
Doc at the Radar Station says:
The Fed is doing a very delicate balancing act. They need to appear "credibly irresponsible" enough to quash deflationary expectations and at the same time not be perceived as so irresponsible that they crash the dollar. So they need a decent firehose coupled with a humoungous fast-acting sponge.
Doc at the Radar Station Fri Apr 3 21:59:34 2009 CDT #
lars says:
Thoma wrote: "But if people believe that that Fed's hands are tied because of the harm reducing inflation would bring to the real economy, an out of control deficit, or due to political considerations that force them to accept inflation they could and would battle otherwise, then we have a different situation and long-run inflation expectations will change accordingly."
That is the issue exactly. And for my money, I have little faith the FED will be able to withstand the prevailing political forces when it comes time to "remove the punch bowl".
lars Fri Apr 3 22:00:01 2009 CDT #
punditry says:
Noble , the money went to the richistan's, the top five million american's who take 6-10 vacations a year, work maybe 8 months, and consume resources at a rate that would make the space shuttle fuel manager blush.
punditry Fri Apr 3 22:00:38 2009 CDT #
MrM says:
Our regular long bond check
Yield as of Jan 2, 2009 = 2.83
Yield as of March 18, 2009 = 3.57 (The day the Fed announced it would buy bonds)
Yield as of Apri 3, 2009 = 3.70
MrM Fri Apr 3 22:00:52 2009 CDT #
hong konger says:
If I were whispering to Bernanke right now, I'd say:
"I can't prepare a meaningful budget you tinkering nincompoop."
That's about all "anchoring" means to me (in a practical sense).
I wonder if Mellon didn't make a mistake at all? That by allowing liquidation, he shortened the Depression by 15 years?
I guess if Japan stumbles along another ten years, we'll know the answer...and our future.
hong konger Fri Apr 3 22:01:04 2009 CDT #
Black Star Ranch says:
"They don't know what they are doing. Nobody does."
.....but it IS a Grand Experiment - US being the guinea pigs. Mix a little foreign involvement thru the IMF, the World Bank, and G20 Accords and MANY papers will be published and many threads discussed for centuries....
Black Star Ranch Fri Apr 3 22:01:48 2009 CDT #
ATM card and $19 in the bank says:
Noble,
If I understand your question correctly, I think the answer is that the money essentially *was* destroyed. Here's my personal example. I bought and sold a house in a bubble area. The profit was real and sat in the bank as real money for a while. Bought another house in a non-bubble area. That house has gone down in value. If I sold today, I might be able to put a little money back in a bank account, but the account balance would be much smaller than my previous bank balance.
Did the person I bought the house from get the money? Not really; he bought another house, too, and his house has likely gone down in value as well. These houses used to be worth X and now they're worth Y. In other words, the money is gone.
ATM card and $19 in the bank Fri Apr 3 22:02:03 2009 CDT #
Barley says:
Whats to think about?
We need to save banks, cause 100s will go under - NOT!
We need to stave off deflation - NOT!
We need to inflate - NOT!
It is a poker game to sell the people on a brighter future, better prospects.
A prof once told me that is a country called itself a "Democratic" something the chances are it is nothing but.
We have a made in Amerika problem that shifts and moves the balance of power and facilitates to solidfy the wealth, the money, the power with a very few.
How odd that we find ourselves a socially free nation with an africian american prez only to find ourselves economic slaves to 1% of the nation who determine our destiny.
Sorry for the diatribe....I just find it odd
Barley Fri Apr 3 22:02:15 2009 CDT #
Noble says:
EHP - hear, hear.
Noble Fri Apr 3 22:02:21 2009 CDT #
CRbot says:
The Latest from Mish:
New York Times Threatens To Shut Boston Globe
CRbot Fri Apr 3 22:02:59 2009 CDT #
1 currency now [yogi] says:
That Jefferson-bot quote has been exposed as bogus so many times I almost know it by heart. (Maybe that's the idea)
1 currency now [yogi] Fri Apr 3 22:03:08 2009 CDT #
MrM says:
the money essentially *was* destroyed.
Looking at all money supply measure, one can easily check that no money had been destroyed.
It the debt that is being annihilated en masse.
MrM Fri Apr 3 22:05:07 2009 CDT #
Benjamin B says:
The debate ought to be is the global economic system in a stable region, representing indefinitely sustainable production.
If you spend all your life trying to answer a question without success, might I humbly suggest you are asking the wrong question(s)
Astounding! I have never been able to imagine economics without floating sets of curves vaguely shifting about a chart.
What book did you get this from?
Please come work for me, we are overworked and expanding at the fastest rate in our 86 year history. You can write your own pay check, so long as it is in dollars.
Benjamin B Fri Apr 3 22:05:29 2009 CDT #
Black Star Ranch says:
"and the Times, which owns the Boston newspaper, made the demands on Thursday morning in a meeting with leaders of the newspaper's 13 unions, the Globe reported."
If I had to deal with 13-unions daily I would shoot myself - or sell out and move to the desert and grow veggies.
Black Star Ranch Fri Apr 3 22:07:33 2009 CDT #
EvilHenryPaulson says:
Inflationary/Deflationary expectations. They're like using phasers on the Borg. Or crying wolf.
Exponentially decreasing effectiveness. We are more than 50 minutes away from the end of this. All jawboning is wasted on the jawboners themselves
EvilHenryPaulson Fri Apr 3 22:08:12 2009 CDT #
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CRbot Fri Apr 3 22:11:07 2009 CDT #
Maximus says:
I have been writing about our current path and it's likely outcome for weeks, but now the blogosphere's new superstar Tyler Durden of Zero Hedge has taken up the issue so I thought I would post it here as I think it's vital to gain a historical context on things at least as much as economic data....
<h2 class="date-header">Friday, April 3, 2009</h2>
<h3 class="post-title entry-title">Evening Thoughts And Question Of The Day</h3>
Maximus
http://4best4worst.wordpress.com/
Maximus Fri Apr 3 22:13:43 2009 CDT #
EvilHenryPaulson says:
MrM
Debt is an asset on someone's balance sheet
The size of one's balance sheet affects not only one's propensity to consume, but the availability of credit to encourage consumption
Everyone's consumption is someone else's income
We have stumbled while running on this ponzi treadmill, and are stuck inside the positive feedback loop which is on a scale more powerful than any clique of central banks in the world
Would you agree to that, if not the semantics of money destruction?
or a condensed alternate version: the credit in the system is greater than the monetary base by several orders of magnitude, and it is unwinding in a positive feedback loop. Bernanke believes credit availability is the key to reversing that feedback loop. He is also incorrect
---
I'm ranting, anyone have something to direct my rants at?
EvilHenryPaulson Fri Apr 3 22:17:00 2009 CDT #
Mannwich says:
Some of us have already had more than one drink and might need more. Another round please!
Mannwich Fri Apr 3 22:17:22 2009 CDT #
EvilHenryPaulson says:
thanks Noble
Benjamin B, only if you promise to pay my salary in grade A bananas
EvilHenryPaulson Fri Apr 3 22:18:12 2009 CDT #
Ye Olde Death Spiral says:
This bomb went off back around Hanky's freak out party.
It went off. The radiation is spreading. Lies and excuses are not helping anything.
AIG was exposed with Bear and Lehman.
What's that band aid now.. like 200 BILLION?
The radiation is spreading.
Ye Olde Death Spiral Fri Apr 3 22:19:35 2009 CDT #
Alo says:
No not Lo. Lo would not publish career-bruising links such as this:
http://www.youtube.com/watch?v=GlMWTxtsP_4
Alo Fri Apr 3 22:32:44 2009 CDT #
Tom Stone says:
Politicians are incapable of doing nothing.most especially when doing nothing would be the wisest choice.
Tom Stone Fri Apr 3 22:36:02 2009 CDT #
Wisdom Speaker says:
Yes, this is a physics blog. But it's physics in a universe without a "conservation of money" law, or even a "conservation of wealth" law.
@Noble and Longwaver: In fact, the money can simply disappear. When 10 people buy houses for $1,000,000 each in a city with 10,000 houses, ALL the houses increase in (paper) value. That's not real money or real wealth, but you can take out a mortgage on it. When the 10 people default and take everyone else underwater, the dollar wealth disappears again.
Wisdom Speaker Fri Apr 3 22:46:48 2009 CDT #
Comrade De Chaos says:
I think FED is forced to walk on the edge of a razor. Must be mach 3 because on one side there is deflation /credit crunch, on the other political pressure and from above huge uncertainty /budget deficit. They way Ben talked in this particular case, could be due to the opinion that FED policy is the most effective when it is unanticipated. So he is trying to be as unclear as possible, before hi hits the HELO and starts another round. :)
Comrade De Chaos Fri Apr 3 22:54:58 2009 CDT #
ppk says:
Go EHP! You are on a roll today.
ppk Fri Apr 3 22:58:00 2009 CDT #
Anonymous says:
The deflation persists and becomes more aggressive as the jobs and incomes tied to the financial economy and over-stimulated consumer sector vaporize. More and more people go cash flow negative. Until we 'reach bottom' the collapse will intensify. At some point, one too many people will become bankrupt, jobless, hopelessly indebted wards of the state. The 'stimulus' required to address a dramatic dislocation in the real economy, (caused by an even more powerful dislocation in the financial economy) will quickly overwhelm the financial resources of the US. If you need something new to worry about, its not hyper-inflation, but hyper-extinction. After a painful transition, the dust will settle, and new local industry and infrastructure will come on line to re-constitute the work force. The USD gets cut in half, which basically splits ownership of responsibility down the middle. Life goes on.
Anonymous Fri Apr 3 23:07:49 2009 CDT #
longwaver says:
@Wisdom Speaker
Don't confuse assets with money. Once a bank (with the help of fractional lending) decides to make a loan, money is created.
Let's say it's 8:45 AM and I walk into a bank. I fill out some forms and we agree to create $500,000 in debt. Now I walk out at 9AM and we still haven't created money, just agreed to do it in the future.
Now it's 10AM and I show up at closing and buy a home. The bank wires $500K in newly created money to the seller.
The seller now has $500K that up until 9:59AM didn't exist.
Now how can this money be destroyed? It's so simple it's hard. The ONLY way to destroy money for us mortals is to burn it. Take a stack of 20s and throw em' in the fireplace. For banks or the government they can "erase/delete" it since they own the master ledgers.
If the price of the home I just bought for $500K goes down, that has ZERO impact on the $500K that I gave to the seller. Even if the seller took the $500K and bought another home, the $500K went to that seller.
Also don't confuse the bank's balance sheet with money.
Money is created 2 ways... Printing more (aka counterfeiting) or 2 parties that agree to create debt. If we didn't have fractional reserve lending, then printing would be the only option.
Once created it can only be destroyed by the reverse of printing (burning) or erasing/deleting now that we have computers.
longwaver Fri Apr 3 23:08:31 2009 CDT #
longwaver says:
@Wisdom Speaker
One more thought... It's easier to understand the creation of money if you think in purely physical terms.
Imagine everyone has to carry around a bag with all of their money in it. No place to park money.. All physical hard currency.
When I bought that house for $500K, someone had to put that $500K in their bag, but I didn't take it out of my bag. The "bank" just decided that it was in their bag their whole time..
Presto! Here is $500K.
longwaver Fri Apr 3 23:12:12 2009 CDT #
Simon says:
To me it's astounding that people's expectations can have such a key role in the process. This implies an extrodinary amount of slack in the system between the two extremes. What I mean is hat there is a zone in the middle where a small impetus will cause movement readily in either direction. The impetus being peoples expectations.
To me it seems wrong that people's expextations can be decsisive in causing one thing or another. The real properties of the system should govern eventually. For example people can hoard money in expectation of deflation for only so long. Eventually they need to spend money on things. In the long run people are going to notice how much money they have acumulated and decide to treat themselves in some way.
Simon Fri Apr 3 23:13:47 2009 CDT #
longwaver says:
@Simon
I have a slightly different take. Everyone needs a purpose. At this point Americans don't have a unified purpose.
Depression is such an apt term. A severely depressed person might starve when their is more than enough food 10 feet away in a pantry.
According to the unemployment numbers, since March 1st 600K+ people are now without a purpose. Nobody needs them to show up some place tomorrow morning.
longwaver Fri Apr 3 23:20:24 2009 CDT #
Anonymous says:
Debt is money. As debt is destroyed, money is destroyed. FRNs can be instantly conjured without limitation only if private and public sector bank balance sheets expand without limitation.
They're only of 'value' in private hands. Assets on the balance sheet of a hopelessly insolvent institution like the USG have no meaning.
Anonymous Fri Apr 3 23:22:32 2009 CDT #
Richard Kline says:
If one accepts the arguments of Williams here as a context for the remarks of Bernanke quoted, that would imply that Bendover Ben sees a deflationary threat posed by credit contraction within the US economy. This is separate from a deflationary threat posed by _demand_ contraction, itself a major problem, with direct inputs from surging unemployment. Supposing that Ben's 'pump up the volume' policy is, then, explicitly aimed at maintaining the supply of credit in the US economy, it's a stupid way to go about it that will produce peckishly little bang for the tera-buck. Ben's policy pushes money into dead zombie banks, whose operators have zero intention of 'increasing the credit supply' because their company specific deficits increase by the quarter. They will swallow down that money supply to recover their capital position for many's the month before the loan a dime into the real economy. So if one believes that this is the intent of Bernanke's actions, then he's a well-intentioned fool. That's the kindest thing which could be said for it.
Now the actions taken elsewhere by the public financial authorities to backstop and maintain Agency debt and Agency credit issuance, while colossally expensive, do in fact support such a putative goal, to maintain operating credit in the real economy . . . _if_ someone out there is issuing mortgages to begin with. Of course, those who might be issuing such mortgages aren't on Ben and Timmy's Best Friends List. The best way to support credit in the real economy would be to open a government, nonprofit, high-volume lending system which loans to the real economy directly and otherwise supports credit at the 'retail' level. That would be socialism, though, thinking the unthinkable for Ben and Tim and Larry and Bo Prez, so that is exactly what is not being done. Better to hope that the wealth class goes back to buying yachts and the ripple effect floats a few voters, what?
Richard Kline Fri Apr 3 23:22:45 2009 CDT #
longwaver says:
@Anonymous
Debt creates money. The destruction of debt DOES NOT destroy money.
You borrow $500K for a home.. Wire that to the seller.
The next day you default.. Never paid a dime.
So does the bank remove the $500K from the seller's account?
longwaver Fri Apr 3 23:24:31 2009 CDT #
Anonymous says:
You've still got $500K - but as a bank 'asset' of questionable value. It may still 'be there' but its destined to be worth less than $500K is worth today as more and more FRNS are administered by public spending stewards.
Parent Post
Anonymous Fri Apr 3 23:34:55 2009 CDT #
EconDude310 says:
what is happens is that to borrow the 500k, you need to put money down these days, lets say 50k...would you put down 50k and then not make any payments? would you put anything down if houses are still overpriced and falling in value? people just are not doing this these days, even if banks would let them.
also, banks don't usually hold the loans, they try to package then and sell them. so that 500k loan was now purchased by a pension/hedge/money market fund, etc. the fund spent 500k of cash for an expected cash flow to meet it's monthly obligations/dividends. if you don't make your payments, the funds options are to not pay the dividend, pull the money from somewhere else, or sell the "asset" at a loss. either way someone is not getting payed. even if the bank keeps it and loses money, it's stock price and dividend stream goes down, and peeps that needed those dividends to live from are now getting less cash.
no free lunch here (or anywhere)
Parent Post
EconDude310 Sat Apr 4 02:39:54 2009 CDT #
longwaver says:
@ Anonymous
Agreed. The bank owns the home, but it just makes their balance sheet toxic and reduces their future ability to create even more debt/money. Has ZERO impact on the money they have already created.
Now imagine that one $500K transaction multiplied by many times.. Credit cards, cars, homes, student loans.
MASSIVE amounts of money have been created. The banks could all stop lending tomorrow and ZERO money is destroyed.
Physical currency must be burned to destroy it or the owners of the master ledger must pull the money out of the system and erase it.
One way to ramp down currency inflation would be a massive tax that collects money for a government account that is zero'd at the end of every month.
longwaver Fri Apr 3 23:39:11 2009 CDT #
patientrenter says:
I realize that Bernanke said more elsewhere, but in this excerpt, he does not commit the Fed to returning the money supply back down to its levels prior to his quantitative easing. What he said is that "In particular, these activities must not constrain the exercise of monetary policy as needed to meet our congressional mandate to foster maximum sustainable employment and stable prices." In other words, he has two goals, as always - boost employment, and limit inflation. According to the Keynesians now in the ascendancy, higher employment requires sacrificing the goal of keeping inflation very low. In a recession, the goal of higher employment is what the public and politicians want, much more than they want to avoid inflation. Unless you have a strong central banker with a long-term view (e.g. Volcker), backed by the top politicians, that transates into more inflation. So we will have lots of inflation, as soon as Bernanke can get that ligher fluid ignited.
patientrenter Fri Apr 3 23:44:10 2009 CDT #
rich says:
Longwaver has it right. Using the house example, you can't borrow against it unless you A) take someone else's money (which doesn't create any money, but simply moves it from the lender to the borrower), or B) borrow from a fractional reserve bank, which actually creates money as longwaver described.
If the home's value goes down, no money is destroyed. In the case of both A and B, you still have the money you borrowed. Even if you default, you still have the money (or, if you spent it, whoever you spent it to has it).
Sorry to pimp my own site but I discussed this at length in this article I wrote:
http://www.pcasd.com/the_us_government_will_not_choose_deflation
(scroll down to the sections titled 'lost financial asset "wealth"' and 'credit deflation')
BTW as someone else pointed out, it's a bit of a pointless argument because all the monetary aggregates are growing at double-digit annual rates. So, clearly money is not being destroyed.
Rich
rich Fri Apr 3 23:47:22 2009 CDT #
Anonymous says:
"Oh! wait! ... Newton was a physicist, not an economist."
OT to reptillian 7:22
Somewhat shockingly, Newton was a "warden of the Royal mint," "comptroller," and
"unintentionally moved the Pound Sterling from the silver standard to the gold standard by setting the bimetallic relationship between gold coins and the silver penny in favour of gold. This caused silver sterling coin to be melted and shipped out of Britain"
per wikipedia.
The old physicist got around!
Anonymous Fri Apr 3 23:53:43 2009 CDT #
poic.v20 says:
You buy a house for 200k. Two years later it's "value" is 400k. You take out a 200k heloc and buy a car, a few other goodies. The house goes back down to 200k. The value was never there in the house and you walk away from the home. The 200k in heloc debt is real, the value was never there.
Multiply this by millions and the leveraged shadow banking system that comprises 40% of the US credit available has disappeared. An economy that is 70% consumer credit driven cannot easily handle a 40% drop in available credit.
poic.v20 Sat Apr 4 00:28:05 2009 CDT #
AnonyMiss says:
Alo, thanks for the link to the William K. Black interview. Very interesting, incendiary even. When I checked Google news though, I found precious few articles quoting him. Odd.
AnonyMiss Sat Apr 4 00:37:16 2009 CDT #
Anonymous says:
Bernanke doesn't actually say that they definitely intend to reverse these policies in the future; only that the positions are designed so that they can be unwound. I haven't seen anything that irrevocably commits them to any policy or any reversal of a policy. Don't assume that there is a plan to shrink the Fed's balance sheet (well, there probably is a plan, but don't expect to be implemented as a matter of course). And don't expect any clarity on this question from the Fed or anyone else in a position to know. Why would they not leave their options open and preserve their informational advantage when that's really all they've got?
Anonymous Sat Apr 4 01:06:50 2009 CDT #
Anonymous says:
mumbo jumbo. economics is more art then science. It sounds like these people are just throwing words out there and hoping some stick for long enough for them to keep their jobs.
Where is the evidence that "quantative easing" can cause inflation, or prevent defaltion?
Anonymous Sat Apr 4 01:11:33 2009 CDT #
EconDude310 says:
agreed, if anyone finds evidence of this please post. i haven't seen it anywhere!
Parent Post
EconDude310 Sat Apr 4 02:42:25 2009 CDT #
ShortCourage says:
Longwaver, what you say doesn't sound right to me.
When a debtor defaults on a debt, a creditor's money is destroyed. No?
For instance, when an investor buys an MBS, that MBS loses value as broke homeowners (homedebtors, actually) walk away from their homes. The defaults destroy money in the form of MBS securities.
A bigger example would be if the US government defaulted on its debts, and offered to pay, for example, only 50% on its outstanding Treasury Bonds (perhaps an unlikely example). Wouldn't that represent the destruction of money?
Isn't that just the same as what happens when massive numbers of individuals or businesses default on their promises? Some creditor or investor loses purchasing power. Money is destroyed...???
ShortCourage Sat Apr 4 01:22:51 2009 CDT #
Anonymous says:
I can't believe anyone doesn't understand how money is being 'eliminated' in this current period of 'reversion,' in reaction to the bubble's run-up over the last 5-7 years. By the way, I'm in the inflation camp, and think it's occurring now, and that we'll see more soon.
However, it's very simple: money is being destroyed every day by banks/lien holders etc., being forced to write-down toxic debt to market value --- whenever a house is 'short-sold' or foreclosed upon, there is recognition of real negative monetary loss on balance sheets, or did we all miss the collapse of Bear Stearns, Merrill Lynch, Fannie and Freddie, not to mention AIG, and the absolute failure of WAMU, Lehman Bros., and IndyMac, to name a few of the larger ones! Isn't that the corresponding money destruction some are claiming has not occurred?!
Our Fed/Treasury has been creating $$$ anew, to pump into the system to maintain it from complete failure, as a result of the bubble's collapse and related monetary destruction!
Of course money has been destroyed, much as it was created.
I think one could argue that inflationary $$ policy was what initiated and sustained the bubble/run-up in the first place, but I haven't heard it referred to that way, exactly.
Anonymous Sat Apr 4 04:34:50 2009 CDT #
longwaver says:
@EconDude 310 / Anonymous.
Not sure I have another way to explain this. Money IS NOT destroyed by ANY event other than you burning physical cash or the owner of the master ledger (banks / government) deciding to erase it.
Those are the ONLY two options.
Every Fortune 500 company in American could liquidate tomorrow. Every mortgage could be valued at ZERO and NO MONEY would be destroyed.
If those events happened, the amount of money in your checking account would not be reduced. Your pockets would not empty out automatically.
Be careful with your terms. If every Fortune 500 company liquidated, many people would have newly worthless assets, like shareholders. But assets and money are two VERY different things.
longwaver Sat Apr 4 07:44:41 2009 CDT #
longwaver says:
One more comment in case you come back to read this. If you have investments and you don't understand the difference between money and assets, PLEASE start reading ASAP. Take some classes, start reading articles that deal with this topic.
Unfortunately you were either taught wrong or never covered this topic. Either way you have a significant gap in your knowledge.
- Asset deflation is VERY real right now and happening at an alarming rate.
- US Dollar deflation is also happening right now as a side effect of the asset deflation. Spooked people are trading other currencies for the dollar and/or hoarding US cash which drives up the price.. Simple supply / demand.
- At some point in the future, US Dollar inflation will kick in once the MONEY that we have created is used to exchange for food and such. All the currency inflation that we've exported for decades comes back home.
longwaver Sat Apr 4 07:57:48 2009 CDT #
Yaun says:
The largest portion of money is created from credit. Only a small fraction actually is monetary base money (M0), most was created by leveraging M0 through fractional reserve banking. And this money (credit) can be destroyed.
Yaun Sat Apr 4 08:08:13 2009 CDT #
Latka says:
Great Post CR - one of the best explanations of the issue Ive seen.
Latka Sat Apr 4 08:21:55 2009 CDT #
Paulo says:
The only way to bring Real Estate values up is through forced inflation of durable goods, by artificial deflation of the dollar.
One needs to ask what happens to everything else around though.
Real Estate prices are the root of the economic problem, Bernanke is trying to solve it with what seems to be a magic bullet, lets wait and see the unintended consequences of his actions in this complex world of ours.
My simple and personal vue.
Paulo Sat Apr 4 08:45:36 2009 CDT #
Invisible Hand says:
What you are calling "Deflation" is really just another Bubble, which could be called the "dollar/Treasuries bubble'. This bubble is a stampede toward the safest assets -- dollars and Treasuries-- and when this bubble pops there will be a stampede out of dollars and Treasuries.
Will Bernanke really be able to offset the bursting of the dollar/Treasuries bubble (which he calls Deflation) when it happens? NO. He won't be able to withstand the political heat that will come when he tries to rein in expanding money supply. Besides, the sad reality is that he is printing money to buy Agency securities, Long-term Treasuries, and garbage loans -- which will become even less valuable when this bubble pops.
Invisible Hand Sat Apr 4 08:51:36 2009 CDT #
Anonymous says:
If anyone doubted why we got in this crisis, and why nothing is working, and why things will continue to get worse - this commentary from the Fed research department is all you need to read. Complete and total bullshit. The Fed cannot control or create inflation at will - if it is lucky to do that (lottery odds are better) the results would be catastrophic. Imagine what the foreign bond holders would do if inflation expectations suddenly increase ? Who will buy the enormous supply of TBills to pay for deficits? OK, maybe the Fed, but that will eventually lead to a collapse in long bonds as well as the USD..there is no way out. There is a monetary noose on the economy - primary trend will be deflation for at least 2-5 years, with some chance of minor increases in inflation expectations along the way. If, by some miracle or planned despotic action (print 20-30 T and mail out consumer debit cards that must be used to buy things within 1 year or else taxpayers would need to add unspent amount to taxable income, or Fed can charge the banks a penalty on all reserves held there - same for private savers), the Fed hits the lotto and "creates" inflation, the currency and long bond markets collapse - there is simply no control on anything. Almost everything the Fed does makes things worse. They are overwhelmed and clueless. Add in the reliance on their BS economic theories which are loaded with false assumptions about investor / human behaviour, and you have all the makings for a catastrophe. The Fed needs to go. It should never have been established and is designed solely to confiscate wealth and concentrate economic power in the financial elite.
The pyschology of the public and our foreign bond holders / buyers will end up determining when we change from deflation to inflation - not the Fed or government.
JO
Anonymous Sat Apr 4 09:32:34 2009 CDT #
Anonymous says:
ok cr, after reading all of this i am cornfused. so now they say we will have deflation this year and next, then inflation. all my life i have seen inflation. and so has everyone else. does this mean that inflationary psychology is well anchored in the society? of course this is just a opinion piece like so many others. can we examine the past and then use it to forecast the future , especially in this scenerio since the weapons of mass destruction have been released and who knows what the dollar figure is for the notional amounts or the amounts that end up being owed by one of the pigs sucking at the hind tit of the tarp sow......
Anonymous Sat Apr 4 09:39:22 2009 CDT #
Anonymous says:
what about gasoline prices this year? around here, they are slowly increasing. Does anyone think that they will hit us with high gas prices again this year. I think if they did , it would finish us off and destroy whatever is left of this economy. with fed ex laying off, that tells me the consumer is not buying and therefore companies are not shipping. etc etc.
Anonymous Sat Apr 4 09:45:46 2009 CDT #
Terry says:
As for the FDIC taking Friday off, I think it may be more of a situation where the banks that would normally bid for these failed banks are taking Friday off. In the past three cases of significant bank failures, I have never seen as many "pay-out" situations where no bank came in with a purchase and assumption agreement. The FDIC is not geared to run a bunch of failed banks and assets, and it no other bank is willing to ste in and buy the crap, then the FDIC might as well let them live a few more Fridays.
Terry Sat Apr 4 10:00:50 2009 CDT #
cent21 says:
A small problem; the financial markets already gambled on positive inflation and extrapolated that assets would continue to inflate at a higher rate than wages. Asset prices got so far ahead of median wages, and consumer prices, that when that bubble popped, there was a long long way to go down.
Remember the "era of stability", when the USA was supposed to be able to grow its assets faster than the debts that were piling up with the rest of the world? Poof! That illusion has been shattered, but the financial industry seems to still think they should earn as if all that illusory equity were real.
cent21 Sat Apr 4 10:14:46 2009 CDT #
Yancey Ward says:
I realize I am way late to this thread, but Bernanke isn't a complete idiot (he is much, much smarter than Paul Krugman- I like damning with faint praise). There is a problem with letting people know you are committed to higher inflation- they will overreact and place all their savings in silly things like gold, silver, and platinum, or in oil and other useful commodities. This defeats the stated purpose of the quantitative easing which is to save the credit system.
Ask yourself this- if you knew that five years from now the base money supply was certain to be thee times what it is now with no chance of a contraction, what would you do? I will give you my answer- I would liquidate all dollar paper holdings and buy gold. To do otherwise is insane.
Yancey Ward Sat Apr 4 11:01:45 2009 CDT #
Anonymous says:
The percentage of firms reporting a rise in the cost of existing credit lines rose to 35 percent in March from 26 percent in the February survey, while the percentage of firms reporting no change in cost held steady at 53 percent.
The percentage of companies reporting a rise in the cost of new loans rose to 62 percent in the three months to March from 57 percent in February. Only 26 percent saw no change, down from 29 percent the previous month.
Bank policymakers have cited banks' restrictive lending practices as a major threat to an economic recovery in Britain, and last month launched a 75 billion pound asset purchase scheme to help get money flowing around the economy.
Anonymous Sat Apr 4 11:33:44 2009 CDT #
END