The Fed's Maginot Line

[donalds]

Re: The Fed's Maginot Line

In the above, I failed to add that one needs to click on to the October 4th broadcast.

[GRG55]

Re: The Fed's Maginot Line

It won't happen because the ultimate cause of the problem: securitized lending, is broken and a replacement has yet to be found.

The actions of the US and other G7 governments will temporarily alleviate the consequences of the securitization debacle, but the fundamental securitization mechanism must be replaced for the free credit to again flow. Unless you think Europe will buy crap MBS bonds again?

Even a return to the 1985 model of banking won't do; that would still mean losing 2/3rds of the previously available credit (or more).

If you think things are bad now - just wait to see what happens when government guaranteed loans are being made by banks capitalized with government capital.

That will be a very short but spectacular bubble.

I'm waiting for the day we see a government owned bank foreclose on a government loan to a delinquent government employee who bought the house from the RTC [and remortgaged it one too many times]...

[Rajiv]

Re: The Fed's Maginot Line

You can embed the broadcast by using the Big M tag as below

[MEDIA]http://shout.lbo-talk.org/lbo/RadioArchive/2008/08_10_04.mp3[/MEDIA]

[DrYB/C]

Re: The Fed's Maginot Line

Cointegration and Cagan's model of hyperinflation under rational expectations

by Tom Engsted

WHEN MONEY AND PRICES ARE INTEGRATED of order two, I(2), and shocks to money demand or velocity are stationary, then the Cagan (1956) monetary model of hyperinflation has the implication that real money balances cointegrate, in the sense of Engle and Granger (1987), with the rate of inflation. As a result, one can estimate the interesting parameter in the model, the semielasticity of the demand for real balances w.r.t. expected inflation, super-consistently in a cointegrating regression without having to specify the exact expectations formation process....

1. Iceland Cuts Key Interest Rate to 12% From 15.5% (Update2) http://www.bloomberg.com/apps/news?p...d=azrp3E_O4HNE

As expected: first the price, then the aggregates (as they attempt to monetize the increasing economic costs of currency price disequilibrium during the process of disequilibrium reversion to equilibrium).

As stated in my first itulip.com post, dtd 2/29/2008, our current malaise will end in hyperinflation and war.

[FRED]

Re: The Fed's Maginot Line

We are working on an update to this article. The demand for money could collapse as the economy improves. Then the Fed has to find ways to withdraw liquidity very quickly. This may be easier said than done.

[ThePythonicCow]

Re: The Fed's Maginot Line

We are working on an update to this article. The demand for money could collapse as the economy improves. Then the Fed has to find ways to withdraw liquidity very quickly. This may be easier said than done.

Antal Fekete has an excellent discussion of inflation, deflation and the fallacies of the Quantity Theory of Money.

A couple of his more recent efforts can be found at

• A Critique Of The Quantity Theory Of Money, and
• Hyperinflation or Hyperdeflation?.

I recommend this work to your consideration.

[marvenger]

Re: The Fed's Maginot Line

Isn't it only rich bankers who have money now?