Although it appears obvious conceptually, we're not so sure the markets yet fully appreciate the fact that in true generational deleveraging cycles, monetary policy is powerless to influence credit expansion. Again, our near myopic focus on credit is driven by the fact that credit is the cornerstone of modern economic development and balance, and certainly not just in the US. The character, availability and price of credit regulate the ongoing tone of aggregate demand, so monitoring credit is simply crucial. If credit cannot expand, then neither can aggregate demand. A simple yet key truism, especially in our current circumstances. As you can see below, we've seen literally unprecedented monetary expansion so far in the current cycle, yet private sector credit creation (as is exemplified by the bank loans and leases outstanding) remains wildly subdued at best. The whole pushing on a string thesis? Exactly.
Q: “Do you have funny shaped balloons?”
A: “Not unless round is funny.”
That is definitely a contrary viewpoint (although maybe not on this website).
I've been watching Fox News today and have seen a Goldline (or some other gold dealer) commercial at
almost every commercial break, the selling point being that it's an inflation hedge. This tells me that people
have it all wrong, and are not seeing the deflationary pressures that are in place today.
Again, makes me want to place a big bet on 30 year government bonds...
"All men's miseries derive from not being able to sit in a quiet room alone."
Adam1226 wrote:
Again, makes me want to place a big bet on 30 year government bonds...
I still kind of like them for some reason... even at 3.3%.
Hard to not want to load up on some ee bonds right now, also.
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."
That simple statement is what lots of people are missing.
Bernanke dreams of inflationary expectations taking hold, but they won't (and can't) in the midst of a long term deleveraging trend.
There will be pockets of inflation along the way, which will be followed by demand destruction as people simply run out of money to pay the higher prices, which will be followed by more recession. That's what deleveraging is all about.
The only way to shorten the duration of this process is through massive debt forgivenesss, which won't happen as long as the financial interests continue to have the political influence that they currently have.
Q: “Do you have funny shaped balloons?”
A: “Not unless round is funny.”
