Evans-Pritchard

[due_indigence]

Ever the alarmist, and yet the most eloquent proponent for deflation out there.

http://www.telegraph.co.uk/finance/c...et-revels.html

[DRumsfeld2000]

Re: Evans-Pritchard

I think he makes a lot of sense. I am pleased to see that instead of just bashing Europe and Asia, he has finally come to realise that the USA is in a huge financial mess.

[due_indigence]

Re: Evans-Pritchard

The KA could be so culminating that the POOM never gets a chance to sprint. Deflation means cessation of economic activity. Yikes. Stone Age. High inflation means that the economy continues to function, albeit at undesirable price levels. Sounds good to me, relatively speaking. (Though let's bracket off hyperinflation as another animal altogether.)

The silver lining (or gold if you prefer) of 'too much money chasing too few goods' is that there's still MONEY to give chase and goods to give chase to! Hurray! A modern economy!

The absence of debt means the absence of money. Deflation is everyone standing around looking at one another, empty-pocketed and hunter-gathering. Gold is a paperweight. So is a brick.

Scotch. Ciggies. Nylons. Chocolate. Paper. Scissors. Rock.

[unlucky]

Re: Evans-Pritchard

The KA could be so culminating that the POOM never gets a chance to sprint. Deflation means cessation of economic activity. Yikes. Stone Age. High inflation means that the economy continues to function, albeit at undesirable price levels. Sounds good to me, relatively speaking. (Though let's bracket off hyperinflation as another animal altogether.)

The silver lining (or gold if you prefer) of 'too much money chasing too few goods' is that there's still MONEY to give chase and goods to give chase to! Hurray! A modern economy!

The absence of debt means the absence of money. Deflation is everyone standing around looking at one another, empty-pocketed and hunter-gathering. Gold is a paperweight. So is a brick.

Scotch. Ciggies. Nylons. Chocolate. Paper. Scissors. Rock.

I'm fairly confident that Ben and Timmy would agree with your analysis that inflation is better than deflation. I'm also fairly sure that they can arrange to make it happen. The only thing I'm not sure of, is whether they can avoid hyper-inflation. I think they are perhaps not sure of that either. That's why they may dabble, from time to time, with the dark forces of deflationism ("stimulus withdrawal").

[ThePythonicCow]

Re: Evans-Pritchard

That's why they may dabble, from time to time, with the dark forces of deflationism ("stimulus withdrawal").

Are our good central bankers worried we will have too much cash, or are they sucking up as much of it for themselves and their sorry balance sheet as they can get their grubby paws on?

Imagine you're the teenage son of an alcoholic dad. Last year, after a rough patch, he was flush with cash (borrowed money, no doubt) and gifts, trying to "make it up" to you and the family. Now you find him breaking into your little sister's piggy bank, taking money from your savings account and selling your mother's jewels. He says it's "for your own good," that he needs to teach you the value of money and hard work.

Do you trust him?

Alcoholics, drug addicts and central bankers are all notoriously untrustworthy when they are in need of their next "fix."

I would not trust our central bank when they say they are backing off the quantitative easing "for our own good." I suspect that's a con job. I suspect they (the Fed and a few TBTF banks) are sucking up what cash and treasuries they can get their hands on, in an effort to shore up a rather ugly looking (if it were to see the light of day) balance sheet.

(Disclaimer: my dad, rest his soul, was neither a banker nor an addict. If you know someone who was or is one of them and I've misrepresented them, my apologies.)

[ASH]

Re: Evans-Pritchard

I suspect they (the Fed and a few TBTF banks) are sucking up what cash and treasuries they can get their hands on, in an effort to shore up a rather ugly looking (if it were to see the light of day) balance sheet.

The part about the Fed doesn't make mechanical sense to me. Maybe I'm not understanding what you're trying to say.

Insofar as the Fed creates the reserves used to add assets to its balance sheet, it doesn't have any reason to be concerned about holding bad assets on its books, except for the future contingent need to withdraw reserves from the system by selling balance sheet assets back to the market. This is in contrast to commercial banks which might be rendered insolvent by holding bad assets on their balance sheets.

"Sucking up Treasuries" implies to me that the Fed is buying Treasuries, which means it would be adding reserves to the system. On the other hand, "sucking up cash" would seem to be the inverse operation of selling assets from its balance sheet and removing reserves from the banking system. I'm not sure what it might mean for the Fed to be sucking of Treasuries and cash at the same time.

I would buy the idea that commercial banks might be sucking up Treasuries and simultaneously trying to pare down their exposure to commercial loans, given the rising rate of default. That said, in this environment of fiscal profligacy, there is no need for the Fed to sell assets from its balance sheet in order to supply the market with Treasuries to buy. The Treasury is spewing out quite enough, I should say.

I think the simplest explanation is that the Fed is engaging in some jaw-boning to control inflation expectations and shore up the dollar, during this period of high deficit spending. I agree with Evans-Pritchard that it is hard to imagine the Federal Reserve bankers looking at their money supply metrics and concluding that they are facing an imminent quantity-of-money inflation problem. More likely their eye is on the foreign exchange and Treasury yield ball.

[ThePythonicCow]

Re: Evans-Pritchard

The part about the Fed doesn't make mechanical sense to me. Maybe I'm not understanding what you're trying to say.

Yeah, there is that problem ... my ability to gloss over the "details" allows me to paint a broad brush image that might no longer fit the facts . Details, details, ...

Beware of this, however. The movement and reclassification of assets and debits back and forth between the Fed, the TBTF banks, Fannie, Freddie, Ginnie, the Treasury and the FHA has substantial characteristics of a shell game to pump up asset valuations and hide risk. To the extent that certain markets such as Comex or NYSE are controlled by these same parties, they too are insiders to that same shell game.

Movements of assets between these parties might best be understood as neither quantitative easing nor tightening, but rather just asset pumping. Like any good magician, when the crowd might begin to see what's really happening, the Banksters shift the game.

So the public announcements of an easing of quantitative easing serve two purposes. They provide a justification for the shifts in the gaming between the above named insiders, and they provide a justification for the continued tightening of credit to the rest of us peons.

Does someone have a list of the specific actions that the Fed and it's cohorts are taking or considering of late? Getting past my fuzzball explanations to something more useful might require looking at each specific such action, separate from its public justification, to see who benefits and what might be the possible motives for it.