Mish's Global Economic Trend Analysis Message Board

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

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To: mishedlo who wrote (83288)	8/16/2008 5:55:01 PM
From: Claude Cormier	Read Replies (1) of 116555

Mish, In the above you say "we are in deflation (see The Future Is Frugality and Implications of the Slowing Global Eonomy for the deflation case), ". Well I read the articles very carefully and I don't see that you do not make the case for monetary deflation. Monetary inflation is an expansion of money and credit. But the reverse is not necessarily true. For deflation to happens, money must be destroyed. Credit alone is not enough. Once credit is granted to some individual or other market entity, the money is created out of thin air and goes into the economy. But when credit is destroyed, either by housing foreclosure, or loan defaults or whatever, the money initially created by thin air remains in the economy. Only the bank's (who made the initial loan) capital and ability to make more loans is destroy, not the total money supply. And this ability remains diminished only until the Fed intervenes through some of their schemes. For the second time I am asking. If I am wrong , please explain to me. Where is money destroyed?

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