Inflation versus deflation debate for Red Pill consumers

[flow5]

Re: Inflation versus deflation debate for Red Pill consumers

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[hayfield]

Re: Inflation versus deflation debate for Red Pill consumers

flow5- I know the first column is date, but can you tell me what the other three columns represent? Also, can you cite your source for the data?

[c1ue]

Re: Inflation versus deflation debate for Red Pill consumers

Flow5,

Thank you for the explanation.

I can see why you have this methodology from the examples you list, although, the Black Monday example seems a black sheep.

I had thought that there was no previous evidence of instability prior to the actual selling, but your data would imply an exogenous source.

I also wonder, even given that the numbers need to be relative, if specifically large negative numbers demonstrate an impact above and beyond the normal trend behaviors.

Will consider the ramifications - in particular I note the -0.85 in 10/2006 which I cannot associate with any particular negative economic event.

In contrast, Katrina in 10/2005 appeared to have a trend impact.

[flow5]

Re: Inflation versus deflation debate for Red Pill consumers

(1) The fed doesn’t publish uniform data on legal reserves
(2) The fed doesn’t watch the level of legal reserves
(3) Both the assets eligible for reserves and reserve ratios, have irregularly, been sharply reduced.
(4) There is general agreement that legal reserves are no longer binding
(5) The Financial Services Regulatory Relief Act of 2006 provides the legislation to eliminate legal reserves.

This Act perversely intends to make the U.S. banking system more competitive internationally. Instead it will make controlling the supply of money & credit impossible. I.e., the money supply can never be managed by any attempt to control the cost of credit. E.g., New Zealand, which pioneered zero reserve requirements, recently experienced the highest rates of inflation and the highest interest rates in a 25 year period.

[flow5]

Re: Inflation versus deflation debate for Red Pill consumers

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[flow5]

Re: Inflation versus deflation debate for Red Pill consumers

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[flow5]

Re: Inflation versus deflation debate for Red Pill consumers

The Fed actually cut the repo rate to 4%!!!!!!!!!!!!!!!!!!!!!!!

[flow5]

Re: Inflation versus deflation debate for Red Pill consumers

Stop-out/FF Target


12/10 4.27
12/07 4.37 4.41
12/06 3.90 4.49
12/05 4.32 4.31
12/04 4.55 4.50
12/03 4.25 4.52
11/30 3.30 4.66
11/29 3.15 4.55
11/28 3.70 4.53
11/27 4.09 4.39
11/26 4.20 4.62
11/23 4.20 4.56
11/21 4.13 4.50
11/20 4.20 4.51
11/19 4.30 4.51
11/16 4.27 4.51
11/15 3.90 4.54
11/14 4.60
11/13 4.61
11/09 4.49
11/08 4.30 4.58
11/07 4.26 4.39
11/06 4.40 4.22
11/05 4.50 4.29
11/02 4.50 4.28
11/01 4.41 4.59
10/31 4.55 4.60
10/30 4.70 4.78
10/29 4.75 4.84
10/26 4.71 4.80
10/25 4.40 4.86
10/24 4.57 4.74
10/23 4.66 4.67
10/22 4.67 4.71
10/19 4.65 4.77
10/18 4.69 4.69
10/17 4.78 4.70
10/16 4.68 4.68
10/15 4.81 4.83
10/12 4.75 4.77
10/11 4.75 4.69
10/10 4.52 4.75

The FF rate is only symbolic. The repo rate is the actual money market rate. Since 11/20 there seems to already be enough of a spread to cut by .25%

Temporary Open Market Operations To implement monetary policy, short-term repurchase and reverse repurchase agreements are used to temporarily affect the size of the Federal Reserve System's portfolio and influence day-to-day trading in the federal funds market. Printer version E-mail alert Export to: Excel | XML Temporary Open Market Operations for December 13, 2007 Last Updated: December 13, 2007 9:51 AM Number of Operations Today: 3 Deal Date: Thursday, December 13, 2007 Delivery Date: Thursday, December 13, 2007 Maturity Date: Friday, December 14, 2007 Type of Operation1: Repo Settlement: Same Day Term of Operation2: 1 Day Operation Close Time: 09:50 AM Results Amount ($B) Rate (%) Collateral Type Submitted Accepted Stop-Out3 Weighted Average4 High Low Treasury 12.590 0.078 4.17 4.170 4.17 4.00 Agency 24.350 3.057 4.26 4.280 4.28 4.10 Mortgage-Backed 24.250 1.615 4.28 4.280 4.28 4.23 Total 61.190 4.750 Top Deal Date: Thursday, December 13, 2007 Delivery Date: Thursday, December 13, 2007 Maturity Date: Thursday, December 20, 2007 Type of Operation1: Repo Settlement: Same Day Term of Operation2: 7 Days Operation Close Time: 09:40 AM Results Amount ($B) Rate (%) Collateral Type Submitted Accepted Stop-Out3 Weighted Average4 High Low Treasury 13.820 1.612 4.00 4.019 4.02 3.65 Agency 23.250 8.388 4.25 4.267 4.28 4.15 Mortgage-Backed 26.650 0.000 N/A N/A 4.31 4.20 Total 63.720 10.000 Top Deal Date: Thursday, December 13, 2007 Delivery Date: Thursday, December 13, 2007 Maturity Date: Thursday, December 27, 2007 Type of Operation1: Repo Settlement: Same Day Term of Operation2: 14 Days Operation Close Time: 08:30 AM Results Amount ($B) Rate (%) Collateral Type Submitted Accepted Stop-Out3 Weighted Average4 High Low Treasury 19.600 6.000 3.92 3.952 4.03 3.50 Agency 20.250 0.000 N/A N/A 4.28 4.00 Mortgage-Backed 23.900 0.000 N/A N/A 4.32 4.15 Total 63.750 6.000 Top

Show last 25 operations ››

1 Repo = Repurchase Agreement. Reverse RP = Reverse Repurchase Agreement. MSP = Matched Sale Purchase (replaced by Reverse RPs in December 2002). 2 Calendar day count (as opposed to business day count) between Delivery and Maturity dates. Repurchase Agreements may be anywhere from overnight to 65 business days. 3 For Repo, Stop Out Rate is the lowest rate accepted. For Reverse Repo, the Stop Out Rate is the highest rate accepted. 4 Weighted Average refers to the weighted average rate of the accepted propositions.

[flow5]

Re: Inflation versus deflation debate for Red Pill consumers

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[herbkarajan]

Re: Inflation versus deflation debate for Red Pill consumers

Regarding Kasriel in Mish's post - what he is saying - dysfunctional/broken banking system = deflation.

Whoever bets on deflation is making a bet that significant part of the US banking system will fail under bad loans

If you believe Citi, JPM, Goldman and others won't be able to write down bad loans with the help of the Fed, then you have your answer

The side effects of the rescue plan on the real economy is a different story

If Mish wants to engage in a theoretical debate about 'liquidity trap' he should reread his hero's article in bloomberg from 2003
http://forums.sohh.com/showthread.php?t=317283