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Mohamed A. El-Erian doesn't get it either
- Thread starter Q.E.D.
- Start date
Why does any bubble burst?
Because everything has its limit. Even free money.
inflation on real goods and services was binary. It went from almost zero to 10% in like 3 months... how do you explain that within your easy money thesis?
especially when you consider financial assets inflated relentlessly over 12 years.
An example is classic cars. They are up 50-70% in the last year. but hadn't rallied much from 2012-2020.
See my previous post ... which you quoted but appears didn't actually read.inflation on real goods and services was binary. It went from almost zero to 10% in like 3 months... how do you explain that within your easy money thesis?
especially when you consider financial assets inflated relentlessly over 12 years.
An example is classic cars. They are up 50-70% in the last year. but hadn't rallied much from 2012-2020.
See my previous post ... which you quoted but appears didn't actually read.
so you are saying the real inflation is like a water bucket that overflowed but financial assets are linear?
how does that reconcile? I think I know how it does but that doesn’t jive with your easy money argument.
I can't disagree with anything here. It's compatible with what I wrote above.Once again piezoe you miss the mark.
Fed QEternity created many asset bubbles. And as assets inflate they create a wealth effect putting more money in asset holders pockets, which then get spent on high-priced - make that higher-priced - art, wine, women, cars, homes, jets and a partridge in a pear tree.
More money in people's hands with the same, or in some cases, less goods equals inflation.
Private sector money is not "free". There is a limit to how much credit can be expanded. Credit creates "inside money", i.e., money that is created when a loan is made and disappears when the loan is paid of. There is a limit to how much credit can be expanded.Why does any bubble burst?
Because everything has its limit. Even free money.
Credit is only limited by the demand for it. And there has been plenty of demand for it at the Fed induced artificially low rates we have had - past tense.Private sector money is not "free". There is a limit to how much credit can be expanded. Credit creates "inside money", i.e., money that is created when a loan is made and disappears when the loan is paid of. There is a limit to how much credit can be expanded.
I agree completely. The fed continued QE far to long. And they failed to correctly assess what the impact of the covid pandemic payments would be on top of their easy money. They adopted monetary policy suitable to a recession. There was covid caused unemployment, however the payments averted the consequences of unemployment that would normally have been experienced in a typical recession. They adopted policy as if there were no payments. A bad miss!Credit is only limited by the demand for it. And there has been plenty of demand for it at the Fed induced artificially low rates we have had - past tense.
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Yes the limit is demand, and demand has a limit. When in aggregate the nation has as much credit as it can afford demand has, in aggregate, reached it's limit. True for both individuals, busineses and corporations.Credit is only limited by the demand for it. And there has been plenty of demand for it at the Fed induced artificially low rates we have had - past tense.
True but there has been more demand, because of artificially low rates, than otherwise warranted. The price of money is totally out of whack. Said it many times before.Yes the limit is demand, and demand has a limit. When in aggregate the nation has as much credit as it can afford demand has, in aggregate, reached it's limit. True for both individuals, busineses and corporations.
Also The FED has become the lender .... to the world. Which is in no way part of their mandate of keeping inflation in check and maximize, or close to it, full employment.