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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: neolib who wrote (90966)9/30/2007 7:27:46 PM
From: Elroy JetsonRead Replies (1) of 306849
 
Your explanation is pretty good.

In exchanging gold for "Permanent Reserves", the Fed has treated "Permanent Reserves" in much the same way. This is to say they have increased the level of "Permanent Reserves" only as fast as the growth of wealth in the economy.

This has led to a situation where debt has greatly expanded at a rate of 15% or so per year, while "Permanent Reserves", the Fe's version of real money, has expanded at a rate of 4.5% or so annually.

The end result are the problems resulting from an over-leveraged economy.

A Safe Haven commentary suggested money, aka "Permanent Reserves", needs to be expanded as quickly as the debt. But this is a make-believe solution which would only create rampant inflation.

The truth is we're ramping up against the constraints on debt fueled growth.
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