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

To: mishedlo who wrote (67909)	8/10/2006 10:31:54 AM
From: Mike Johnston	Respond to of 110194

I believe we will never experience outright deflation of the money supply. As credit contracts, the Fed will monetize. However we will experience deflation in the purchasing power of the money supply, meaning that as the Fed prints to increase the money supply to counteract credit deflation, the buying power of the money supply will drop much faster than the Fed is able to increase it. If the Fed prints more to counteract the drop in buying power the buying power will drop even more. Witness the rise in energy prices. The Fed is increasing money supply to insulate the economy from rising energy prices but that in turn insures that prices will rise even more.

To: mishedlo who wrote (67909)	8/10/2006 10:41:23 AM
From: russwinter	Read Replies (3) \| Respond to of 110194

<If credit contracts faster than government printing and velocity of money drops..> I'd estimate that credit is actually expanding about 3 times government printing, and has been the whole time we've had this discussion. It's even shocked me (as an inflationist) I have to admit. The global Pig Men have taken over "money" creation, the CB are secondary bystanders, and truly only "men behind the curtain".

To: mishedlo who wrote (67909)	8/10/2006 10:55:41 AM
From: SouthFloridaGuy	Respond to of 110194

<<I expect credit to plunge, via demand alone and also thru bankruptcies.>> As happens almost by definition during recessions, which occur as the Central Bank attempts to fend of inflation created by loose monetary policy during the early part of the cycle. The point is to not cry wolf 24/7 but rather time it to your advantage to make some moolah. And repeat: wash, cycle, rise