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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Claude Cormier who wrote (78503)4/29/2008 9:35:56 PM
From: Real Man  Respond to of 116555
 
The credit creation and soaring M3 comes from FCBs
financing our enormous current account deficit with printed
money - reals, yuan, rubles, etc. 800 billion of new credit
in agencies and treasuries is created per year this way -
and then some on top, since these are "safe" securities that
can be used as good collateral.



To: Claude Cormier who wrote (78503)5/1/2008 3:18:31 AM
From: Chaka  Respond to of 116555
 
Can we say that although total credit shrinked with this transaction, the money supply increased by the difference between the two mortgages

I think what you are missing here is that the original mortgage was loaned through levered money (10-30X for regular banks and investment banks). So, the credit shrink is 10-30X the difference of the two mortgages - this can easily result in money shrinkage.


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