mishs' take on excess reserves and bank lending

[Roughneck]

Very interesting. Most inflationistas use the money supply chart to scare folk,myself included.

http://www.marketoracle.co.uk/Article15998.html

[Spartacus]

Re: mishs' take on excess reserves and bank lending

Mish declared deflation as "upon us" before 2006, based on some falling prices. The earliest I can bother to come up with now is this one ...

http://globaleconomicanalysis.blogsp...anecdotes.html

Have we had unremitting deflation, worse than Japan, worse than the US great depression, since then?

http://itulip.com/forums/showthread....tion#post73138

Mish is committed. like the pig's committed to your eggs & bacon breakfast. COMMITTED.

While he has IMHO backpedaled a little, sometimes[1], he MUST still find reasons to be right. Anything that sounds plausible. And this latest does sound plausible, and who knows, could even be right,
but I weigh the source as well ...
and the source's motivation ...

Very interesting. Most inflationistas use the money supply chart to scare folk,myself included.

http://www.marketoracle.co.uk/Article15998.html

He reminds me of some Windows NT admins that used to troll the Linux USENET groups 10 years ago.

At the time Linux had a "traditional" networking implementation and NT had 2 "theoretically better" features, zero-copy and "sendfile".

These trolls were constantly saying the NT stack was "better" because it had a couple of "theoretically better" features. They always ignored that in practice Linux beat the pants off NT. In performance (network included), stability, etc ...

Point them to real world results and the reply was always "the NT stack is superior. The theoretical advantages are ..."


[1] IMHO in an attempt to give himself an "out" if he's completely wrong

[metalman]

Re: mishs' take on excess reserves and bank lending

mish discovers double entry bookkeeping!



if he'd done so in 2007 he'd have saved his sorry readers from sleepless nights of worry about deflation.

[grapejelly]

Re: mishs' take on excess reserves and bank lending

Mish's argument is that banks are short of capital, and the constraints on capital, along with the lack of good borrowers, means banks cannot lend enough new money to create inflation.

Mish says this excess reserves thing is a red herring because people ignore the above.

However, I disagree. The US government will borrow as much as it wants to or can, to the tune of almost two trillion dollars in the past year. And this borrowing is like all borrowing in a fractional reserve fiat system -- inflationary.

Banks are given reserves at will, and interest is paid on these reserves. The banks therefore can "earn" money, a riskless spread between virtually zero percent when borrowing, and whatever US government bonds earn, even if it's 2 or 3% on long bonds.

This is so easily manipulated. Witness the past year, with insolvent banks booking profits.

Mish ignores all the evidence because his own theory blinds him to what is going on right now.

The excess reserves will be lent out to the US government. This is just a fact. There is nothing but inflation as far as the eye can see. There is no limit to how much a determined government and and will depreciate its own currency. That is fact and that is history

Yes, there is debt deflation, but so what? There is monetary inflation, increase in the money supply, and it WILL result in increases in commodity prices and eventually other costs, as inflation leaks out of the FIRE economy and lowers the purchasing power relentlessly for wage earners, investors, savers and retirees.

It will end when everyone is completely broke.

[harset]

Re: mishs' take on excess reserves and bank lending

Why Are Banks Holding So Many
Excess Reserves?

Todd Keister and James J. McAndrews

[*T*]

Re: mishs' take on excess reserves and bank lending

Very interesting. Most inflationistas use the money supply chart to scare folk,myself included.

http://www.marketoracle.co.uk/Article15998.html

Steve Keen's take on this article

[big67]

Re: mishs' take on excess reserves and bank lending

Thanks, the article is interesting.
However, the reason given in it for the excess reserves not being inflationary is quite strange: all that the authors are saying is that the FED by paying interests on Excess reserves can sterilise inflation.

I would add a couple of words: FED can sterilise inflation for now. Sometimes in the future these reserves will be lent out, this is a plain fact.

The second point I noted is that, from the very nice picture at page 7, "Assets and Liabilities of the Federal Reserve System", you can draw a horizontal line and discover that the inflation in Federal Reserve Notes (the green area under the orizontal axis, that is "dollars in circulation" or MZM I guess) is about 20% since 2007.

[CanuckinTX]

Re: mishs' take on excess reserves and bank lending

Steve Keen's take on this article

I read your link T, but I don't see any comments from Keen save one minor point he clarifies before he posts the article.

So is he implicitly agreeing with Mish by saying Mish wrote an excellent article and Keen does nothing to refute it?

[metalman]

Re: mishs' take on excess reserves and bank lending

I read your link T, but I don't see any comments from Keen save one minor point he clarifies before he posts the article.

So is he implicitly agreeing with Mish by saying Mish wrote an excellent article and Keen does nothing to refute it?

they were both wrong about deflation.... so it makes sense for them to band together to change the subject... talk about excess reserves as if that had any bearing on anything... red herring.

have they noticed... in countries with high inflation there's hardly any credit? most transactions are cash?

[lsa420]

Re: mishs' take on excess reserves and bank lending

mish discovers double entry bookkeeping!

In my humble opinion, your greatest (funniest) post ever. Ha!

*I'm an accountant so I appreciated this.