Interesting article over at zerohedge.
Of course, the one aspect that Moody's does not discuss at all is the surge in money printing. Yet as monetary aggregates are still falling, and all the excess money is held by banks in the form of excess reserves, the debate continues to be just what catalyst will force banks to part ways with this handy $1.2 trillion buffer.
Not this again. The banks are not holding onto anything at all. If you line up a 100 million people that are able and willing to take on additional credit at an exponential rate, you would be back on the road to growth. The problem is the system is tapped out, you ran out of the amount of lemmings to support your pyramid scheme.
Banks will lend, they have no one to lend to. Why people continue to talk about this is beyond me. You ran out of brick to put in your pyramid, I guess you could start digging up corpses and have them sign on the dotted line.
Inflation is the increase of money. In today's system "credit" is used as money. Credit use is not expanding, it's collapsing. Unless you can find more and more people willing to take on more and more debt, it's over... simple as that. You are simply running out bricks to put in your scheme.
YOU KNOW WHY I KNOW THIS WILL COLLAPSE? BECAUSE I CAN DO SIMPLE MATH AND NOBODY CAN EXPLAIN HOW HUMANS CAN SUPPLY AND DEMAND AT A EXPONENTIAL RATE LONG TERM. IF THEY COULD EVERY PYRAMID SCHEME WOULD BE UP AND RUNNING.
"Credit is now money. If you can fund your own credit then the credit would never exist."
ReplyDeleteyou're saying if the USG chooses to QE to infinity, we'll have a collapse & hyperinflation? and if they don't, we'll have a collapse & deflation? okay, but isn't that the whole argument -- which will "they" choose?
There is no choice once you go down this road. Credit is either expanding at the rate needed or it's not and it starts to collapse.
ReplyDeleteIt always ends with deflation, the federal government has no ability to expand the credit base long-term. They can put digits on a computer and claim it's credit, but when it gets to that point no actual credit is being created.
Zimbabwe is a prime example of that. This one guy told me while that was going on that hyperinflation could go on forever, I said watch in a year the madness over in Zimbabwe will be over. It was already over, credit has shrank to nearly zero. If a (insert entity here) can fund it's own credit, then there is no reason for the credit to exist, in fact it doesn't. I can't lend myself a shove, well I guess I could but they will probably put me in a padded cell.
The Federal government does not have unlimited power. You could see a spike in price inflation but ultimately it will all come crashing down because humans have no ability to supply nor demand exponential growth.
Men have been trying to beat the equation for centuries.
My impression isn't that the inflationists are arguing that inflation can go on forever. They're just saying inflation/hyperinflation first, then deflation. Deflationists say straight to deflation.
ReplyDeleteThe argument is basically what form of savings is best to make it out of this mess w/some kind of wealth preserved. Deflationists say cash, inflationists say commods (basically). So while it's true that a hyperinflation will be followed by a deflation, if you keep your savings in USD, you'll still lose everything.
You're saying straight to deflation, correct?
All I can say is that inflation is negative right now and I believe we are in a death spiral. The government putting digits on a screen is not "inflationary" because they have no ability to increase "credit". If they can fund their own credit there would be no reason to have the credit in the first place.
ReplyDeleteI am not saying the USD will not completely, eventually it will do just that but it wasn't because of inflation, it was because credit was unable to expand at the rate needed to sustain the system.
I expect most "credit" instruments to go to zero or next to zero.... the dollar is a component of the the total credit system. The USD is considered a safe haven until the system slams it, but then again if you are funds manager where do you park $10 billion?
It's a race to the bottom.
"I am not saying the USD will not completely"
ReplyDeleteshould be
"I am not saying the USD will not completely collapse"
Where, in your estimation, is gold headed in the near term? And what about the long term? Finally, do you (or should everyone) own gold? If so, what percentage of your assets do you hold in it and why?
ReplyDeleteThanks.