To: pogohere who wrote (41352 ) 10/14/2008 7:54:07 PM From: TobagoJack 1 Recommendation Read Replies (2) | Respond to the proof is everywhere you choose to turn away from'money sitting in vaults' or their electronic equivalents these days is representative of the rising demand for cash balances. however, there is a limit to this demand. one of the drivers of a higher demand for cash balances are actually rising prices (i.e., the effect of previous inflationary policy). prices are now falling however, as can be seen in the raw materials indices - this is to say the very prices that determine much of the short term needs for high cash balances (energy, food) are now plunging. therefore we are getting closer to the point where supply and demand for money will be in balance and go the other way; this is also true in the context of the deleveraging cycle , which likely has not yet run its course, but has made big strides already. while e.g. margin loans remain way too high to call for a low in this cycle, we also know that banks have been hoarding cash, and so have hedge funds. meanwhile, there is now a global drive toward devaluing money in an attempt to stop the falling credit house of cards to inflict too much damage on all those who were so responsible to mire themselves up to their eyeballs in debt. this is slightly different from Japan's odd man out situation in the 90's, when Japan's liquidity pumping was used mainly to inflate asset prices elsewhere.
