Can you guys clear up some some confusion?

[FSBS]

So FSBS, are you saying you're aaronmalins aka TechnicallyFundamental ?
BTW, Aaron, sorry to disappoint you but I'm still alive despite all your frequently expressed fervent wishes for an early death for me.

I don't know this "Aaron" person to whom you are referring but I'm sure that he and yourself would have buried the hatchet a while ago. I'm also sure he would have said sorry for being an ar5ehole.
It can be frustrating to continually watch your account balances tend to zero and I'm sure it could make you do strange things

 

[Mr. Charts]

I don't know this "Aaron" person to whom you are referring but I'm sure that he and yourself would have buried the hatchet a while ago. I'm also sure he would have said sorry for being an ar5ehole.
It can be frustrating to continually watch your account balances tend to zero and I'm sure it could make you do strange things

Hello *****,
I'm always happy to make peace
Richard

 

[Mr. Charts]

Well I see FSBS has been banned........

 

[Vaco]

he made it a little too obvious that he was a reincarnation.

 

[virtuos0]

Well, my main point isn't really that it won't cause inflation. I don't really know whether it will or it won't, as it's a function of behavior, nothing else. I just really have a lot of issues with people offering an extremely simplistic view of "more money supply = inflation". At the most trivial level, we have a very obvious counterexample, namely, Japan. For many years they have been trying to induce inflation by resorting to every trick in the "Central Banker's Money Printing for Dummies" manual. Where has it gotten them?

In my view, what is quite obvious is that the CBs/govts across the world are walking a very fine line between inflating a mother of all bubbles, on the one hand, and driving their economies off a cliff, on the other. How all of this plays out is anyone's guess, but I just don't see runaway inflation that some commentators like to rant about as a foregone conclusion.

You are only looking at one side of the equation when it comes to money supply and inflation, you need to look at corporate and household debt. What has happened in Japan, and the reason why the government cannot induce inflation, is because they are being offset by the falling household debt as a percent of GDP. Whereas In the UK and US household debt as a percentage of GDP absolutely exploded in the last decade in both cases from roughly 70% to 100% (the UK slightly worse).

Now that the bubble has burst and household debt in the UK and US is dropping, the government is having to do the same thing that Japan did in order to keep deflation at bay. It's always a balancing act between the different sectors of debt.

If you look at overall Japanese money supply (take any of the M's you want) it has barely risen in the 'lost decade', certainly not enough to induce any lasting inflation.

 

[Martinghoul]

You are only looking at one side of the equation when it comes to money supply and inflation, you need to look at corporate and household debt. What has happened in Japan, and the reason why the government cannot induce inflation, is because they are being offset by the falling household debt as a percent of GDP. Whereas In the UK and US household debt as a percentage of GDP absolutely exploded in the last decade in both cases from roughly 70% to 100% (the UK slightly worse).

Now that the bubble has burst and household debt in the UK and US is dropping, the government is having to do the same thing that Japan did in order to keep deflation at bay. It's always a balancing act between the different sectors of debt.

If you look at overall Japanese money supply (take any of the M's you want) it has barely risen in the 'lost decade', certainly not enough to induce any lasting inflation.

I am certainly not looking at one side of the equation... I am refuting the argument made by people who are.

 

[virtuos0]

I am certainly not looking at one side of the equation... I am refuting the argument made by people who are.

Apologies, now that I reread your post with a little more care I see you were making the opposite point to the one I thought you were!

 

[virtuos0]

There have been many threads on the imminent threat of inflation looming in the US due to Bernanke's game of "test your might" with the USD digital printing press but what I don't understand is if:

a) Doesn't repaid TARP instantly come off of the M3 and return to the nothingness from whence it came? If so, the the only money really created/given to banks in the bail out is the yield on the treasury bonds the banks bought up...*headache*

b) Wouldn't the whole sub prime mess mean HUGE write downs and again decrease the M3 from 2007-8 levels

c) Unemployment should erode savings...

d) Hasn't a significant portion of US GDP been destroyed through collapsed banks and sell-offs to other countries etc... (5.7% lol)

e) Interest rates have nowhere to go but up



Where does inflation fit in to all of this?

I know I don't really know my stuff here but I'm still interested

Regrading e) I think you'll find that interest rates have nowhere to go but to stay the same.. circa Japan. Many countries have certainly reached that tipping point. From looking at countries that have chosen to raise rates ie Australia, their recent hold of rates probably indicates that they now realise that they've screwed themselves over, their housing market is an accident waiting to happen now.

 

[montmorencyt2w]

You are only looking at one side of the equation when it comes to money supply and inflation, you need to look at corporate and household debt. What has happened in Japan, and the reason why the government cannot induce inflation, is because they are being offset by the falling household debt as a percent of GDP. Whereas In the UK and US household debt as a percentage of GDP absolutely exploded in the last decade in both cases from roughly 70% to 100% (the UK slightly worse).

Now that the bubble has burst and household debt in the UK and US is dropping, the government is having to do the same thing that Japan did in order to keep deflation at bay. It's always a balancing act between the different sectors of debt.

If you look at overall Japanese money supply (take any of the M's you want) it has barely risen in the 'lost decade', certainly not enough to induce any lasting inflation.

Which all rather goes to support the idea that most of our money is little more than debt....a fairly thin crust on which to support a modern industrialised society.



Bearing in mind the comment lower down about interest rates, that suggests that the tools the CBs and governments have at their disposal are pretty limited.

 

[virtuos0]

Which all rather goes to support the idea that most of our money is little more than debt....a fairly thin crust on which to support a modern industrialised society.



Bearing in mind the comment lower down about interest rates, that suggests that the tools the CBs and governments have at their disposal are pretty limited.

Absolutely, the more debt the less options.

Of course the only real option (and only option that has been completely ignored) is to let the necessary deflation just happen. Of course that will cause economic devastation, but considering that that economic devastation is inevitable at some point ,it may as well be now. The longer we mask things, the harder the fall.