Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: RJA_ who wrote (36733)	7/8/2008 5:10:47 PM
From: TobagoJack	Respond to of 217592

reads true. below just in in-tray 'disinflation' is actually a meaningless term from a classical economics point of view, but the probability that we are about to enter a period of deflation - i.e. negative growth in money and credit - is quite high. banks can not expand their lending, and many of them have to actually shrink their asset base. the only way for money supply to keep expanding is a massive monetization of government debt - which has to be large enough to exceed the shrinkage in assets on the banks books (whether via default or otherwise). this in turn would require an alteration of the Fed's modus operandi - which at the current time is not likely, since 'officially' everybody is worried about inflation (it even made the cover of the Economist recently). of course it is almost inevitable that they will alter their m.o. in this direction - we're basically following the Japanese post bubble playbook almost to a T so far. the idea that government should increase its share of economic activity via more spending and money printing during economic downturns is still not discredited - in spite of the fact that it is both theoretically and empirically unsound (historically, it has always achieved the exact opposite of the intended effect, which accords with economic theory of the non-Keynesian sort). unfortunately the idea that government should do that is almost universally supported in spite of the method's poor record . to support this idea you have to actually believe that government will make better use of scarce resources than the free market would, an idea that borders on insanity. anyway, considering bureaucratic inertia, we can probably expect a little while of genuine money and credit deflation, after which the treasury and the Fed will spring into action and make matters worse by revving up the printing presses and deficit spending.