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To: UnBelievable who wrote (25265)	12/14/2001 5:53:28 PM
From: NOW	Read Replies (1) \| Respond to of 209892

UB: a couple thoughts: 1) what percent of the money "left" the market and what percent simply went to money heaven? A lot of money has gone to money heaven. Debt remains.... 2) You say: "the only inflation we have seen so far is in stock prices" but this is not really true. Land values etc in some areas at least have soared. Insurance costs are soaring (esp. health care). 3) It seems to me these economic terms are best discussed at a micro rather than macro level as the concept of inflation and defaltion are otherwise to broad to be useful....

To: UnBelievable who wrote (25265)	12/21/2001 4:19:05 PM
From: pater tenebrarum	Read Replies (2) \| Respond to of 209892

well, it is true, you don't see the deflation in the money supply numbers. but there are parts of the monetary gestalt where you DO see it. first in the corporate bond defaults which you already mentioned...and secondly in the commercial and industrial loan bank assets, which are actually shrinking fast, as well as the commercial paper market, which is practically disappearing. the money supply increase is just a shuffling around, whereby the public holds now more currency and fewer bonds than before, but the currency is needed to pay off debt. the money velocity has precipitously plunged. and i for one doubt very much that the huge increase in money market deposits (especially institutional money market assets) will find its way into the real economy. true, that did happen in the past, but the most recent wave of mortgage refis (the main source behind the MM fund deposit surge) has NOT resulted in a spending spree. then there are the huge industrial overcapacities and malinvestments that have been built up (mostly on credit) during the boom. the liquidation phase has begun, and is in fact accelerating. we have too much of everything...and the need for cash to service the enormous private sector debt load ensures that deflationary pressures due to this liquidation process will continue. if you look at the one inflation measure that is actually rising, the Cleveland Fed's median CPI, it is doing so entirely due to service prices still rising sharply. but the deflation works its way through all sectors, one by one. eventually it will imo engulf services as well. and i also think that by this time next year, the RE bubble, and with it the credit growth it engendered will have popped as well. when that happens, we could actually see the growth in the broad monetary aggregates go negative.