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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (31273)	4/27/2005 3:10:49 PM
From: ild	Read Replies (1) \| Respond to of 110194

Date: Wed Apr 27 2005 14:46 trotsky (Wiffo, 13:16) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved there is a good reason why i focus on the very recent developments and not on all of the past 5 years - the recent slowdown in money supply growth is probably a better indication of future developments. note that the excessive growth in money supply and credit that began in 1995 has created a huge debt-berg collateralized by vastly overpriced assets ( houses and stocks ) . when ( not if ) the prices of these assets mean revert, what will be left is the debt-berg sans sufficient collateral. this is bound to be deflationary, as defaults and a scramble for liquidity will likely cause a more pronounced and protracted contraction in the money supply. of course the central banks will fight it, and so far they have won the first round of the fight - but it's a Pyrrhic victory, since the underlying structural problem has worsened considerably as a result of their efforts. in order to expand the money supply it is not enough to offer 'money' at too low an interest rate. you also need willing and able borrowers. the BoJ has pumped truckloads of money into the system with its quantitative easing policy, and it just sits there - nobody wants to borrow it, even though it comes 'for free' ( at a zero nominal interest rate ) . Date: Wed Apr 27 2005 11:39 trotsky (Wiffo, 10:39) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved "..all you have to look at is the amount of money the fed has recently created," broad US money supply growth rates are at a 10 year low. the short term growth rate of MZM ( zero maturity money ) has even dipped into negative territory recently.

To: ild who wrote (31273)	4/27/2005 5:04:50 PM
From: skinowski	Respond to of 110194

the banking cartel represented by the Fed is imo not interested in such an outcome - it won't implement actions that will undermine the very source of its power ( thus the famous Bernanke 'helicopter money' threat is imo just hot air ) . this is not to say that it might not be forced by circumstances to TRY it one day. but that would require a very dire situation indeed... This is a good summary of the "helicopter money" issue. The "dire situation" which could force the Government's hand would probably have to be something along the lines of a severe deflationary episode... Politicians would be called upon to save the day, and they would oblige, of course - because, as they would explain to us, people are more important than banking profits and various "paper imbalances"....