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Not Deflation...
- Thread starter PohPoh
- Start date
Exactly right. Inflation will kick back in but unfortunately, the public will be in much worse shape than they were the first time prices sky rocketed. After a brief inflationary period deflation will kick in and things will really get ugly. Hopefully we grind down like Japan did or the US markets will close.
Quote from PohPoh:
This is not deflation...
anymore than it was not record home ownership, record equity prices...all of which were artificial, nominal, and not based on reality...
Deflation would imply a contraction of money supply....money supply is expanding at a record rate, despite money velocity collapsing...the Dollars being hoarded by Member banks is only a temporary, artificial situation. It cannot and will not last. Inflation remains fully intact - the damage is done.
When the Dollars are released into supply, and they certainly will be, you will see what I mean...
Quote from ProfitTakgFool:
Exactly right. Inflation will kick back in but unfortunately, the public will be in much worse shape than they were the first time prices sky rocketed.
You're forgetting one thing, everyone's printing money like mad right now, so inflation is a net wash.
The dollar would be tanking like no tomorrow against every currency if the US was the only one counterfeiting money.
The key is who's going to be able to idle their presses first.
Quote from Daal:
then you better sit down, keep waiting for the day somebody can owe more than their entire balance sheet
The Treasury has, over time, sold the Federal Reserve roughly 52% of the total national debt.
That fact is undeniable, it's part of the government record.
What you're not getting is that the Fed's balance sheet is current assets and liabilities.
What it doesn't show you is the 95-odd years of salary, maintenance, construction and other miscellaneous expenses that the Fed has paid out during its inception.
And, oh yeah least we forget PROFIT!!!
It is, after all, a private business, not a government agency.
There is zero question that purchasing ability is fleeing the system at an astounding rate.
I think that statement is key. The question is how it manifests itself. It could be lower consumption due to evaporation of credit, with prices remaining constant or declining. Could be lower consumption due to rising prices as a result of gov intervention.
I think we will see lower consumption due to impending massive unemployment, with prices declining in spite of gov intervention. We are only beginning to see the effects of this vicious circle, imho. I believe a great number of the jobs of the last decade were based on servicing the credit and housing bubble. Think of all the construction, real estate, and mortgage jobs that will not be back for years. These jobs mitigated the pain of job losses due to globalization, but the suddenness of their disappearance and the realization that there is no industry to absorb them will shock the system in a way that remains to be felt. This will snowball into job losses on an unprecedented scale. A "service economy" only works if you have enough wealth to afford services.
I hope I'm wrong. If we are lucky, we will see a surprise technology breakthrough, like quantum computers or some alternative energy thing, and we can turn off the grinder.
Quote from PohPoh:
This is not deflation...
anymore than it was not record home ownership, record equity prices...all of which were artificial, nominal, and not based on reality...
Deflation would imply a contraction of money supply....money supply is expanding at a record rate, despite money velocity collapsing...the Dollars being hoarded by Member banks is only a temporary, artificial situation. It cannot and will not last. Inflation remains fully intact - the damage is done.
When the Dollars are released into supply, and they certainly will be, you will see what I mean...
Money supply contraction, or traditional "deflation" has occurred.
Inflated asset prices allowed increased borrowing against those assets.
The value of those loans were compounded by fractional reserve lending upwards of 50 times their original value.
As asset prices collapsed, so did the money supply as prior loans were paid back (contracting supply) and new loans were not made, or for a smaller amount.
There is deflation in the consumer banking side. But there is massive dollar inflation with FED money measures.
Whats going on here is the Banks are withholding those injections from being lent.
The FED prints money, but then the Banks explode it through fractional reserve *lending*.
If there's no lending, there's no parabolic explosion in money supply.
How the FED "sterilizes" those injections, I don't know.
Again, there's not enough information.
FED hasn't said what its bought, and from who. And banks haven't said how much they've sold and what they've got left.
The no-recourse, sub-alt-a loan values aren't known.
And now Paulson says they're gonna buy equity stakes instead of paper.
Equity stakes would allow capital auctions through share dilution = more cash on the books for what?
Consolidation. Buy outs. Capital accumulation paid for by the taxpayer.
The decision not buy paper or nullify CDS proves the Treasury has no intention of actually fixing this crisis.
Wallstreet wants to drag it out, as long as possible, because they haven't ever seen this kind of Money - EVER.
They're making a killing.
We're gonna inflate big time after the banks lend again. The FED has given limitless avenues for banks to get money.