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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 (75259)	12/11/2006 10:53:58 AM
From: orkrious	Read Replies (3) \| Respond to of 110194

Interview with Paul Kasriel globaleconomicanalysis.blogspot.com Great blog Mish. Maybe it will put to bed the argument about deflation you've been having with everyone here.

To: mishedlo who wrote (75259)	12/11/2006 12:06:22 PM
From: westpacific	Respond to of 110194

Mish - The number one old man market timer I trust agrees with you. --- That there is no way to defeat the K wave and a deflationary collapse cannot be avoided. Also I do not think the FED (aka Bankers) will destroy their game, an outright deflationary collapse at the end would still leave then in control of the banking system. Great post FYI, thanks for all your hard work. West

To: mishedlo who wrote (75259)	12/11/2006 12:09:13 PM
From: Mike Johnston	Read Replies (2) \| Respond to of 110194

Mish, I appreciate the great effort you have put into this. Great interview with Mr Kasriel. I think that the most important sentence from Mr Kasriel's e-mail and interview is this, and it also comes back to the crux of all my arguments about possibility of hyperinflation: "Short of the Fed depositing newly-created money directly into private sector accounts, I suspect that a deflation would occur under these circumstances. " The bottom line is this, yes theoretically you are correct, deflation SHOULD happen , but IT WILL NOT, because this time the Fed will go unconventional. ( my suspicion is that this process has already gone under way ) The very minute they start massively monetizing the bond market or buying assets, hyperinflation is "baked in the cake". And i am quite sure that Mr Kasriel would agree with me on this.

To: mishedlo who wrote (75259)	12/11/2006 1:26:19 PM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 110194

If you think you can find an economist as well respected as Paul Kasriel to rebut that article, then please be my guest. which article do you mean? do you mean the interview you had with Kasriel? i'm sure Bernanke would disagree with large parts of what Kasriel said--Kasriel dismisses out of hand Bernanke's longstanding assertion that the Fed didn't "do enough" during the Great Depression (and the corollary that Japan didn't do enough either). do you think Bernanke is simply going to agree with the man who dismisses one of his most famous assertions? and Gentle Ben is more respected and smarter than Kasriel. even Kasriel will admit this, unless he got a 1600 on his SAT. that doesn't mean Kasriel is right or wrong. economics has so much noise in it people can and will claim every position on the map. these debates are like proving how many angels can dance on a pinhead.* people are usually just talking their book or their prejudices. "professional" economists obviously have a huge personal investment in their particular positions that has nothing to do with revealing the "truth", if it can ever be said to be revealed in economics. as for Japan and the US today, they are different, yes? my guess is the outcome will surprise everybody. everybody will continue to claim their own position is right, but only a lucky few will have positioned their investments fortuitously enough ex ante to benefit in the long run. that's market efficiency for ya. those not lucky enough to invest well can try their luck at joining the commentariat. * correct answer: "All of them"

To: mishedlo who wrote (75259)	12/11/2006 2:36:14 PM
From: Elroy Jetson	Respond to of 110194

Mish - Many of these people were taught in college that the Great Depression was caused by a decline in the Money Supply (not because money and credit declined, but because monetary velocity contracted sharply -- the effective money supply being money and credit multiplied by the number of times it turns over, aka the velocity). This leads to their delusion that economic contraction can be reliably and continuously prevented by increasing the money supply. And if you can't make people borrow, just mail everyone a check or drop money from a helicopter. You, and I think most sensible people, realize that the Great Depression was caused by the bubble which preceded the collapse. The decline in monetary velocity was simply an artifact of the collapsing bubble. We also see the obvious limits to the concept that, the problems caused by excessive monetary creation can be solved through additional monetary creation. But to the Alcoholic, Drug Addict or Monetarist, this all makes sense. The problems caused by alcohol, drug and monetary creation abuse they believe can always be solved with additional alcohol, drugs, or monetary creation. You stand little chance of deprogramming these people. Having once been taught this false concept, they will not let go of it easily. Their delusion offers them an easy solution to profligacy. The only solution we offer them for financial profligacy is a painful unwinding of the credit bubble. That's a tough sell, even though in reality there's no alternative. For now they prefer their delusions, but they will come to see the truth of Schumpter's observations on the previous era their "solution" was attempted. Policy does not allow a choice between depression and no depression, but between depression now and a worse depression later. Inflation pushed far enough would undoubtedly turn depression into the sham prosperity so familiar from European postwar (WW-I) experience, and would, in the end, lead to a collapse worse than the one it was called in to remedy. For recovery is sound only if it does come of itself. For any revival which is merely due to artificial stimulus leaves part of the work of depressions undone and adds, to an undigested remnant of maladjustment, new maladjustment of its own which has to be liquidated in turn, thus threatening business with another worse crisis ahead. Joseph Schumpeter .

To: mishedlo who wrote (75259)	12/11/2006 7:22:31 PM
From: kris b	Respond to of 110194

Mish, To expand on your work, check this out: piscataquaresearch.com

To: mishedlo who wrote (75259)	12/12/2006 12:31:09 AM
From: daveinmarinca	Read Replies (2) \| Respond to of 110194

Seems to me Kasrial's statement, "Alternatively, if there were a run on the dollar in the foreign exchange market, price inflation could spike up and the Fed would have no choice but to raise interest rates aggressively. Given the record leverage in the U.S. economy, the rise in interest rates would prompt large scale bankruptcies." the run on the dollar has begun. The BIS reports that OPEC and Russia have been shifting $US reserves to Euros <http://www.ft.com/cms/s/277471c2-8889-11db-b485-0000779e2340.html>. Tom Whipple summarizes the situation in Iraq <http://www.energybulletin.net/23410.html> ....some of the folks holding $US reserves are requiring the US to stay the course in Iraq worsening the federal deficit and further weakening the $US. We are in the interesting position of concurrent Catch 22s....worsening $US situation and worsening war in Iraq, neither of which we seem to be able (or willing) to resolve. The US population is addicted to oil and addicted to credit. One familiar with interventions in addiction can speculate that the addict's forced withdrawl of either could trigger Mish's scenario. But, IMHO, not without massive injections of cash, the "dropping of dollars from helicopters" first.