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

To: mishedlo who wrote (96375)	4/12/2009 1:40:49 AM
From: Killswitch	Read Replies (1) \| Respond to of 116555

edit I re-read your post and see you referenced Keen. Cool

To: mishedlo who wrote (96375)	4/12/2009 2:59:54 AM
From: pogohere	Read Replies (3) \| Respond to of 116555

Keen states that banks needn't maintain reserves against commercial lending. Is that so, and if so, how does that weigh, if at all, in your understanding of the role of fractional reserve lending as an essential component of the "credit-money" regime he is describing and that you seem to agree with?

To: mishedlo who wrote (96375)	4/12/2009 7:12:59 AM
From: Jimh068	Read Replies (2) \| Respond to of 116555

Mish, very nice article. Thanks I was just commenting how with all this money printing by the Fed, no new money has shown up. I just base that on an examination of the currency. There are no bills in circulation newer than 2006. With the supposed 25% increase in credit/money we should have seen new bills. Then finding a few articles on our money system is now a credit system and not a fiat dollar system, this all makes sense. Debt to GDP has to come down. Until then we will have deflation. The only way to correct in less than a generation is allow bankruptcies to happen. Very little public debt can be paid off as the economy is not strong enough. I guess devaluing the dollar by at least 50% would work as well. All fixes will be painful.

To: mishedlo who wrote (96375)	4/12/2009 12:49:33 PM
From: Hawkmoon	Read Replies (2) \| Respond to of 116555

Good article/analysis Mish!! One can choose to say in strict Austrian terms there is no deflation because money supply is rising. However, the money supply theory falls flat on its impractical face when it comes to accurately explaining what is happening in the real world. The inflation model simply does not fit. Conditions one would expect to see during inflation, stagflation, hyperinflation, and disinflation are nowhere to be found. The US shows 16 symptoms of deflation for the simple reason deflation is at hand. But let me add one point, if I may. Quantitative theories of money supply are all well and good, but as you pointed out, it's not just the amount, but whether that money is used or hoarded. That means the velocity of money is a vitally important factor to include in the analysis. Inflation cannot truly be predicted without applying the following equation of exchange: MV = PQ en.wikipedia.org en.wikipedia.org If the velocity of economic transactions drops off precipitously (as seems to be what's occurring) and money is changing hands fewer and fewer times, then it would require more monetary quantity to keep the equation balanced. Thus, when we see all of those charts referring to the amount of liquidity being injected, it has to be compared and contrasted against the decrease in velocity. I agree with your forecast of deflation, at least until such a point where the demand side of the equation (employment/wages/debt servicing) reaches a stabilizing level. Right now the Fed/Treasury are pushing on a string when they should be creating demand via productivity enhancing technologies and training. Hawk

To: mishedlo who wrote (96375)	4/12/2009 1:30:46 PM
From: rich evans	Respond to of 116555

Mish, your articles treat money supply as increases in monetary base plus credit creation. But I am confused. I thought M1,m2,m3,mzm included the credit creation by the banks as the loans normally get added to ones checking account and put out into the economy. Rich

To: mishedlo who wrote (96375)	4/15/2009 2:00:57 AM
From: axial	Respond to of 116555

Outstanding Mish. A kucid explanation of fallacious reasoning underlying current interventions. By far the greatest number of predictions have been that hyperinflation is the inevitable consequence of Bernanke's interventions. The Fed has made public proclamations about its intent to withdraw liquidity when inflation begins to appear. In fact the pump won't stop the deflationary spiral, and the withdrawal of liquidity won't be necessary - because the pump won't have the effect everyone has imagined in the first place. Jim