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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: Mike Johnston who wrote (75292)	12/11/2006 2:20:43 PM
From: mishedlo	Read Replies (3) of 110194

So even if there is no willingness to take on more debt, the money can still be injected into economy as Kasriel said, by direct deposits into private accounts. You keep posting stuff that I agree with and furthermore have said many times myself! Yes the Fed CAN (well not really CAN because it would take Congressional action) but let's assume they CAN for the sake of argument. "Although a central bank might be able to sustain a certain amount of inflation by resorting to extreme measures, it can not stop a credit contraction in the private sector. Nor will a central bank bail out consumers at the expense of themselves and other creditors. The FED like the BOJ will stop short of destroying themselves and their power." globaleconomicanalysis.blogspot.com Is the Fed irrelevant? globaleconomicanalysis.blogspot.com In theory the Fed can create hyperinflation by dropping money out of helicopters. In practice the FED is constrained by five factors: 1. Ability of consumers/corporations to take on more debt 2. Willingness of consumers/corporations to take on more debt 3. Willingness of banks/credit companies to extend more credit 4. Ability of banks/credit companies to extend more credit 5. Unwillingness of the federal reserve to print themselves out of power Still looking for exactly what I want but those that think this is the stagflationary 70's might wish to read Billmon Gets It - Do You globaleconomicanalysis.blogspot.com Still searching for exactly what I want but here is another good read [Saville knows what inflation is and what it isn't] globaleconomicanalysis.blogspot.com I finally found it. End Game Analysis globaleconomicanalysis.blogspot.com; There you go Mike. End Game Analysis discusses the ability of the Fed to print at will, a position by Saville (Note saville and I agree on what inflation is, we just disagree as to the outcome). I list Saville's argument for Hyperinflation and why the Fed will not in practice carry out that path although in THEORY they CAN (assuming approval from Congress) Following is the key snip as well as proof that I have considered and even agree with what you said (in theory just not practice). Oddly enough, given that a certain set of someones have dismissed what Kasriel and I have said as "impossible" I have to ask who is really looking at the other side and who is not? Steve is correct about the "theoretical ability" of the FED to increase money supply at will. His statement" "Central banks have the ability to create currency in unlimited amounts so they have the power to reduce the purchasing power of currency under any and all circumstances should they choose to do so" is completely accurate. Has any deflationist ever disagreed? My rebuttal is long so I ask you to read it and consider it. Bottom line, there is theory and there is practice. It is logically silly for banks to give money away to consumers when those consumers might pay bay back banks with inflated money. Banks and credit card companies would not stand for it. Hyperinflation would end the game. The Fed is bright enough to prefer deflation over hyperinflation. Deflation leaves open the possibility to inflate again later after banks take over more real estate and property and more assets. I have a friend that actually believes that is in fact the plan. Mish

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