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 (96539)	4/16/2009 8:49:12 PM
From: Claude Cormier	4 Recommendations Read Replies (1) of 116555

Mish, When you talk about Fc (fiat credit), you never make the difference between credit that is defaulted on and credit that is paid back? Why? Seems to me that the later is truly deflationary as credit is really destroyed. But the former should not be deflationary, since the initial money created by the act of credit remains in the system. Joe Bloe thame a $500K morgtgage on a house that is now worth $300K. Joe has to default. Even if the credit is marked to market and basically worth less than $300K, the initial $500K loaned to him so he could paid the builder, painter and all other construction workers and contractors remain in the system. That money is not destroyed. Please explain how this type of decrease in credit can be deflationary? I am probably missing something as I do not understand yoour point of view.

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