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I've determined that the ability of banks to create credit out of thin air ultimately provides the impetus for the banks to use any marketing technique at their disposal to increase lending due to negligible or zero real cost. This is how the housing asset market inflated to unsustainable...

I've thought about this a lot of times and I can't seem to understand why stock valuations should decrease in times of high inflation. Any asset should be valued as: Cash flows / discount rate The increase in cash flows for businesses should, on average, exactly offset the increase...

Wait a second... Why would optimism result in a decline in euro bond prices and an increase in yield...? Increases in yields are associated with higher risk....

Don't forget exchange rate as a factor influencing supply, it's going to be very important if Bernanke decides to counter deflation even further by pumping out free money for everyone. More money creation with no underlying economic backing directly influences the exchange rate if the other...

I never understood this logic. When an industry is in trouble with costs or slacking demand, there is likely going to be consolidation among the major players. So why does growth in a recession have to come from small businesses? They should consolidate into chains just like "big...

That graph's pretty useless since it doesn't show average (or sub-average) quality of life or purchasing power...

Perhaps I shouldn't have added 'non-collusive' to what I wrote since this is tangential to what I was saying. As of now, banks can borrow at the fed-specified rate and then loan out to consumers. I don't see what is wrong with removing the 'fed-specified rate' part of the equation and...

Gold is not a viable solution. But why not allow (non-collusive) banks to set interest rates as they deem fit to both each other and to businesses and governments? Why can't we just have reserve requirements on banks (to reduce agency costs of imprudent lending), but otherwise allow them...

$30 trillion wasn't just "lost" (oops, I left my $30 trillion at the dry-cleaners, sorry hun). It was wiped out because a corresponding $30 trillion of real economic value that was thought to exist simply did not exist -- It was a function of over-leveraging, financial scams, overly easy...

You should tell him that there are adverse consequences to printing money regardless of whether or not there is inflation in consumer goods markets.

Units are virtually irrelevant. Dollar value represents the willingness to pay of the market for a given commodity and is the most important figure. If I produce 1 tv and you produce 1000 crappy t-shirts, I win. Of course, (long-term) profitability is probably an even more important issue...

Asset price inflation will inevitably trickle into consumer markets. And if only a small portion of it does (because it's being countered by deflationary forces), this is arguably WORSE because it means "main street" has lost jobs and purchasing power whereas capital-owners have boosted their...

You do realize he means $10,000 right? That's how they write it in foreign countries...

This analysis, while being technically commendable, fails to incorporate the asset-inflationary aspects of the Fed's activities. A comment on this very blogpost describes what I'm saying more succinctly than I probably would: ------ "I think it is important, as others have mentioned in...

Stagflation.

This "hedging" you refer to is nothing more than an "efficient market" whereby all participants "arbitrage" prices against new information and new expectations. There are no laws against speculation in vital commodities to my knowledge. Oil speculation is particularly rampant over the past...

Libertad, you're right, I should have been more specific. I didn't mean to say that the oil producers must be the ones behind the recent price moves. It is quite conceivable that traders/speculators, upon the realization that the weakened dollar is here to stay and will likely only spiral...

Or maybe it has to do with the obvious.... Oil is traded in US dollars. Thus, as the US dollar weakens dramatically, in order for foreign oil-producing nations and firms to attain the same level of revenue in their home currency, the price of oil must rise in US dollar terms. Price of oil...

Has anyone thought this is a massive incentive for bank execs to get their company off TARP funds, even if that means the firm will go bankrupt < 5 years? They'll be in the cayman's by then anyways.

As I mentioned, the reason why BOJ monetary easing failed to create inflation was due to idiosyncratic characteristics of the banking sector in the country. Their banks had too much bad debt, and simply couldn't lend -- even at lower borrowing rates.