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Politics : Sioux Nation -- Ignore unavailable to you. Want to Upgrade?

To: CalculatedRisk who wrote (111708)	7/31/2007 2:55:50 AM
From: stockman_scott	Respond to of 361732

Welcome to the YouTube revolution freep.com

To: CalculatedRisk who wrote (111708)	8/7/2007 6:35:38 PM
From: Wharf Rat	Respond to of 361732

Now theoretically this could all happen. But the key premise, which I've screamed out in capital letters is that the Fed stands by and twiddles its thumbs. By creating liquidity the Fed can permit debt expansion. Expansion of debt and credit necessarily expands the money supply. Expansion of the money supply is inflationary, not deflationary. Unstated in this is conversion of the debt/credit into consumer spending. The bull market from 1982, culminating with the stock market bubble of the late 1990s, was converted to consumer spending because the resulting "wealth effect" from capital gains in the 401(k)s convinced Americans they did not need to save. Cheap credit blew a real-estate bubble that appears to be deflating now and was converted to consumer spending through equity withdrawals (see, eg, Calculated Risk's charts on GDP with and without mortgage equity withdrawals calculatedrisk.blogspot.com ). While the increased spending was the result of cheap credit, the consumers didn't see it as taking on increased debt -- in both cases, the households saw their net worth increasing. The Fed can set the stage for cheap credit, but they have little control on where it will flow, and whether or not it will end up as consumer spending. How does the Fed get it into the hands of the consumers without having it show up as explicit debt in their household budget? mcain6925 on August 7, 2007 - 12:18pm theoildrum.com