How is it possible to print money like hell and cause no inflation
- Thread starter misterno
- Start date
try to keep in mind that inflation is only when all prices rise together. more money being produced then total goods and services. pointing out that one particularity industry is inflating is not inflation. it could be do to increased taxes or land prices or other. It's a common mistake especially on ET
Quote from tradestrong:
Because contrary to what the gold bugs would like you to believe, most of the money being printed is not getting into the money supply in the American economy. First, it is plugging big giant holes in bank balance sheets. So a good portion is basically replenishing bank reserves for bad loans and assets that have permanently devalued.
Second, a good portion is also going to foreign banks for the same reasons.
Third, look at the crisis the Euro is in right now with Greece? So the demand for Dollars is actually increasing around the world. This provides another "outflow" of this money being printed going into foreign hands.
Combine that with a change in consumer habits by many Americans, and you have the recipe to NOT have inflation.
+1
They are absolutely correct. The velocity of money is still decreasing.
This is a chart of the total consumer credit outstanding through 02/28/2010.
Consumers are still decreasing their credit lines and living in their means, a tiny bit more, but it appears to be a trend that may continue.
Here's a view of the consumer revolving credit owned by commercial banks, which is included in the data above, but in this graph that data is presented separately through 02/28/2010.
Here is a view of total consumer loans owned by commercial banks, which is also included in the data from the first graph, through 02/28/2010.
This is the data for real retail sales and food service sales through 03/01/2010
While it has been rising lately it is still well below its high.
And finally this is the data for savings deposits through 03/01/2010. I wanted to post personal savings rate but can't find anything that has been updated since 10/2009.
Bottom line is that consumers are spending less and banks are lending less and savings are increasing. It is impossible to inflate if money does not start flowing out faster than it is printed. The time will come, but it's not here yet.
This is a chart of the total consumer credit outstanding through 02/28/2010.
Consumers are still decreasing their credit lines and living in their means, a tiny bit more, but it appears to be a trend that may continue.
Here's a view of the consumer revolving credit owned by commercial banks, which is included in the data above, but in this graph that data is presented separately through 02/28/2010.
Here is a view of total consumer loans owned by commercial banks, which is also included in the data from the first graph, through 02/28/2010.
This is the data for real retail sales and food service sales through 03/01/2010
While it has been rising lately it is still well below its high.
And finally this is the data for savings deposits through 03/01/2010. I wanted to post personal savings rate but can't find anything that has been updated since 10/2009.
Bottom line is that consumers are spending less and banks are lending less and savings are increasing. It is impossible to inflate if money does not start flowing out faster than it is printed. The time will come, but it's not here yet.
Quote from tradestrong:
Because contrary to what the gold bugs would like you to believe, most of the money being printed is not getting into the money supply in the American economy. First, it is plugging big giant holes in bank balance sheets. So a good portion is basically replenishing bank reserves for bad loans and assets that have permanently devalued.
Second, a good portion is also going to foreign banks for the same reasons.
Third, look at the crisis the Euro is in right now with Greece? So the demand for Dollars is actually increasing around the world. This provides another "outflow" of this money being printed going into foreign hands.
Combine that with a change in consumer habits by many Americans, and you have the recipe to NOT have inflation.
Simple and excellent explanation. Everyone is saying "free money, free money" but banks are not lending. Their standards are as strict as ever so the availability of $$ is just not there for the economy. I have numerous friends with small businesses and they are surely not seeing the money that is being pumped to the banks.