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To: SouthFloridaGuy who wrote (83350)	8/17/2008 9:56:26 PM
From: Claude Cormier	Read Replies (2) \| Respond to of 116555

I agree... But the money that was lend stay in the system. So in essence, there is not yet monetary deflation. The ability to lend in the future appears very low right now. However, can the Fed fix that one way or another? Since this is so vital to the survival of the USA, I say they will on way or another... at the expense of the currency.

To: SouthFloridaGuy who wrote (83350)	8/18/2008 11:28:42 AM
From: koan	Respond to of 116555

Credit is destroyed through the multiplier effect on bank lending. Credit is a far bigger part of the money supply than hard currency. If bank gets $1, it lends $10. If bank loses $1, it lends $10 less. Bank writedowns are estimated to be $1.5 trillion, so that's potentially $15 trillion of destroyed credit creation. That's a lot. koan: I believe Bear Sterns was $30 lent for every dollar they had. No telling how leveraged most hedge funds are/were. Many if not most are registered in the Bahamas as I remember. 80%? And as Investment banks also had no regulation, no telling how leverged many of them are/were and how much trouble they are in. But now the unregulated investment banks have the full backing of the US tax payer via the fed. If Bear stearns was 30 to 1, one might guess others are/were as leveraged.