Mish's Global Economic Trend Analysis Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Mish's Global Economic Trend Analysis

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: Tommaso who wrote (44023)	1/6/2006 5:15:13 PM
From: mishedlo	Read Replies (2) of 116555

Tom, M1 comes the closest. It undercounts in general but does overcount one small item. It is a better way of looking at things but has serious flaws (related to sweeps). The best approach is Austrian Money supply figures but I am not a subscriber. "Real Money" from an Austrian perspective is actually negative for the year (2005) or so I was told. I suggest reading this article on Money Supply. Mystery of Money supply mises.org Real-World Economics An Interview with Frank Shostak mises.org You might also look at other things Shostak has written. Now just because I think that real money supply is what matters most, does not mean that credit is not important. Had not credit exploded we would not be in the mess we are in. I believe however but can not prove that a turndown in real money supply will lead to a drop (I believe a huge drop in credit). It is that purging of credit that will bring upon a deflationary collapse, even IF at some point "REAL money" supply stabalizes. That is what happened in Japan. Credit imploded in Japan for 60 straight months even as the BOJ was trying to pump money into the system. All the BOJ accomplished was a massive government debt. This is from an Austrian perspective and I think Heinz would agree with that. I can say that I have seen charts of Money AMS and they have done a far better job at calling recessions than any of the Mx series. Money AMS is now calling for a recession. I believe that recession will lead to a real purge in credit. MZM and other measures are fatally flawed because of double counting. Let me try it this way. Increases in "REAL Money" in the 1990's lead to massive increases in credit. HIGHLY inflationary. Prices however were masked by massive productivity improvemnet and falling commodity prices. So far I think you would agree with that. (I sure hope so). To fight off the Naz bubble bust "Mr Bubble" jacked up "REAL MONEY" once again as well as slashing rates to 1%. Again I bet you agree. That last blast fueled ENORMOUS speculation in housing and credit lending of all sorts. Again I think you are with me. Now, what happens if "real money" supply is tightening? What will that do to all the outstanding credit? What happens to that credit in rising bankruptcies? WE have been down this pasth before and this is the point at which disagreemnets start. But.... Most people are looking at growth in credit (yes it is still expanding but at a slow rate) thinking that is the future. The future will be determined by Money AMS which is now negative. Once that credit bust starts, due to the time lag on interest rate policy as well as the tendenncy of the FED to overshoot both directions, I believe we are going to have a massive purge in credit, that will continue even when the FED starts to loosen up a bit. It will continue because banks will see rising bankruptcies and defaluts on houses and pull in lending (credit ) horns. That is my view and of course only time can prove it. Mish

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next