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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Skeeter Bug who wrote (258170)7/2/2010 2:25:06 PM
From: PerspectiveRead Replies (2) of 306849
 
<the PEOPLE aren't getting the money. i think there is an argument the PEOPLE never will get the money, in which case zimbabwe can't happen here.>

That's the critical difference. Inflation will only happen in the assets that are purchased by marginal dollars created by the Fed. They buy "investment grade" corporate toilet paper - voila, junk bonds soar. The government sets up "homebuyer assistance" - voila, house prices jump for a few months. If they start borrowing tons more money than they have been to build roads, expect asphalt and concrete to rise. But as long as they are giving the money to banksters who park it at the Fed to earn the spread, only banksters get rich, and they have little marginal propensity to spend (unless they chase oil or soybean futures ala 2007.)

I like to think of things in limiting conditions. What would happen if you borrowed and monetized $1 trillion and gave it to one person? Actually, not much. That one person might like gold and bid the price up, or they might go after San Diego real estate and bid that up materially. But if you gave the $1 trillion as $3000 to every man, woman, and child in the U.S., you get a very different outcome, as much of that would be spent.

Where the money enters the system is critical to whether or not it counteracts the deflationary forces. If it doesn't end up in the hands of the indebted, it does little to slow down the process.

`BC
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