Hi deadbull.
Re: the Fed and the printing presses (i.e. excessive money supply growth/accommodation) ...
Perhaps I should rephrase my statement that "the Fed WILL stop the printing presses" to "the Fed will SLOW the printing presses", and I don't know WHEN the Fed will slow the rate of monetary growth, or by how much. And they WILL slow monetary growth IMO for the simple reason that the Fed is really not in control at this point. They have a "degree" of freedom of action ... but this freedom of action is becoming increasingly constrained by creditors of U.S. financial assets/obligations. I guess my main point would be that this is no longer IMO primarily an economic issue, but a geopolitical issue. Also, it is not simply the U.S.'s problem, it is the global economy and financial system's problem. The entire world has built significant excess overcapacity, and if their is a debt implosion in the U.S., the entire global economy tanks ... and the nations that suffer the most in the short-term may well by the emerging economic powerhouses of Asia, as that is where global productive overcapacity has been greatest (by the way, if someone has any statistics to confirm or negate this statement, I'd like to see). From a geopolitical perspective, we are now in a game of very high-stakes poker, with very serious ramifications for all.
deadbull, you stated "Also, per my earlier posts, the financial system has become highly accustomed to monetary/credit creation...it is very hard for me to envision how the financial system would painlessly adapt to any lessening of monetary/credit creation without serious negative ramifications"
Oh, it won't be painless at all, far from it. It will be fantastically ugly and painful. I'm afraid there is no escaping the extraordinarily ugly economic karma that we all have contributed to. We all, as a global community, dealt ourselves this hand, it is our destiny to now play it ... I pray with some degree of humility, skill, and kind heartedness.
((As JW just pointed out, it is taking more dollars of debt to create one dollar of GDP growth. And that assumes that you take the "GDP growth" figures at face value.))
... Precisely why a debt implosion is practically inevitable - the debt must reduced, whether through inflation (screw the creditor) or deflation (screw the debtor). And I believe the figure is between $5-6 of credit growth for every $1 of GDP growth (in the U.S.).
All IMHO.
Best wishes,
Glenn |
