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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: Claude Cormier who wrote (100770)8/12/2009 11:18:43 PM
From: russet  Read Replies (1) of 116555
 
The government interfered with the process in many ways.

If you just looked at the financial system, absent the trillions in government spending, you would see the money supply generated by bank loans have depreciated and this has been reported by many articles in the media with stories of shrinking loans to consumers for cars, houses, liens of credit, credit cards, commercial loans etc. So C of GDP decreases but G of GDP inflates and the total money supply for the moment stays the same.

But you asked why a foreclosure of a property owned by a financial institution could cause money supply to be reduced and I gave you the textbook theory.

Now you tell me what you think the U.S. government will do to that same U.S. money supply if the Chinese and other nations convert more and more of their reserves of U.S. dollars into inventories of metals, food commodities and energy products and start asking for payment of exports into the U.S. market in a currency other than U.S. dollars :-)
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