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

To: Clarksterh who wrote (56560)	3/22/2006 6:24:42 PM
From: mishedlo	Respond to of 110194

Money going nowhere is what happened to Japan. They pushed on a string and no one wanted to borrow and no one wanted to lend. In fact, while that was going on, CREDIT imploded in Japan. That is what I think would happen here. Does money supply matter? yes but given the enormous difference between money supply and what is lent out via fractional reserve lending, credit matters more. One has to measure both cash injections and credit contraction/expansion to get a full picture. Money sitting at 0% with no takers and no lenders while credit implodes describes Japan. I believe but can not prove that something similar will happen in the US. If money does go somewhere I suspect it will be to gold. I can not prove that either. Nor can hyperinflationists prove their version of the story. Time will tell. If protectionism kicks in, then perhaps we get a steep bout of stagflation before deflation. To me this is all about wages and jobs. If wages keep going down and housing slows down and with a slowdown in housing we start losing a lot of jobs we will then find out if I am right or wrong. I believe the FED will be powerless to turn that around, just as Japan was. In fact, I think it will be worse here, because consumer debt is far worse here. Mish

To: Clarksterh who wrote (56560)	3/31/2006 11:43:50 PM
From: Dave	Read Replies (1) \| Respond to of 110194

I'd love to see a paper that ties money supply so directly to inflation. Think about it this way, how easy is it for a gov't to produce an incremental dollar (or whatever currency). Think about it for a corporation to produce an incremental "Lexus" or widget. For instance you can have a large increase in money supply and it all goes into savings accounts Think Japan. The Japanese economy was in a deflationary cycle for about a decade or more under that same mantra.

To: Clarksterh who wrote (56560)	4/1/2006 4:27:59 PM
From: Dave	Read Replies (1) \| Respond to of 110194

I'd love to see a paper that ties money supply so directly to inflation. There are plenty of academic papers on that topic. From a basic google search using these terms: "money supply" "inflation", I found this: econlib.org If the money supply continues to expand, prices begin to rise, especially if output growth reaches capacity limits. As the public begins to expect inflation, lenders insist on higher interest rates to offset an expected decline in purchasing power over the life of their loans. For instance you can have a large increase in money supply and it all goes into savings accounts. That happened in Japan and, in fact, at one time, rates of interest on gov't bonds went negative Inflation is considered to be a monetary phenomenum. More money in the system creates demand ceterus paribus (all things equal). Increases in demand cause prices to rise. Perhaps we're all splitting hairs, but perhaps you should change your argument to: Increases in money supply are not the only cause for inflation. The "conventional wisdom" in economics is that inflation is a monetary phenomena. As such, if you do not believe that this is the case, can you cite evidence proving your hypothesis that: Increases in money supply do not create inflationary pressures on an economy?