Deflation alert: Fed to provide $7.7 trillion

[grapejelly]

http://www.bloomberg.com/apps/news?p...lqDrk&refer=us

Nov. 24 (Bloomberg) -- The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt yesterday. The pledges, amounting to half the value of everything produced in the nation last year, are intended to rescue the financial system after the credit markets seized up 15 months ago.



The unprecedented pledge of funds includes $3.18 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment dwarfs the plan approved by lawmakers, the Treasury Department’s $700 billion Troubled Asset Relief Program. Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis.



Does anyone really think that this is not insane??

And how can anyone predict deflation and have any sense?

[friendly_jacek]

Re: Deflation alert: Fed to provide $7.7 trillion

And how can anyone predict deflation and have any sense?

A question for you, is 7T enough to cover the imploding $55T derivative bomb?

As much as I enjoy the action in the last 2 days, long term I'm not so sure.

[blazespinnaker]

Re: Deflation alert: Fed to provide $7.7 trillion

Well, I think the argument is that we have 100T of derivatives unwinding and general monetary velocity declining rapidly.

Between the great unwind and the massive drop in economic activity, government intervention of a paltry 10T isn't going to do much.

[blazespinnaker]

Re: Deflation alert: Fed to provide $7.7 trillion

Interesting ... I think the deflationary impacts will be short term rather than long term. I think we'll hit the bottom soon.

The question is, how far left to go before we hit the bottom, not really how long (it'll come fast and hard).

[FRED]

Re: Deflation alert: Fed to provide $7.7 trillion

Does anyone really think that this is not insane??

And how can anyone predict deflation and have any sense?

iTulip has been saying that for 10 years. Sans gold standard, in a crisis governments can and will inflate.

Sadly, it is just that simple.

We truly wish the matter were more complicated but it is not.

[blazespinnaker]

Re: Deflation alert: Fed to provide $7.7 trillion

Which do you see as more likely? Inflation or a run on the dollar?

[grapejelly]

Re: Deflation alert: Fed to provide $7.7 trillion

Which do you see as more likely? Inflation or a run on the dollar?

yes.......

[blazespinnaker]

Re: Deflation alert: Fed to provide $7.7 trillion

Wrong answer.. you can have inflation without a run on the dollar if all other currencies equally inflate.

[tsetsefly]

Re: Deflation alert: Fed to provide $7.7 trillion

Wrong answer.. you can have inflation without a run on the dollar if all other currencies equally inflate.

I cant imagine how high gold is going if all currencies inflate (which is a strong possibility)

[grapejelly]

Re: Deflation alert: Fed to provide $7.7 trillion

Wrong answer.. you can have inflation without a run on the dollar if all other currencies equally inflate.

yes that is true.

I don't see the ROW giving up on the dollar. They are in too deep.

But soon, we will have very high long rates. And how will business sustain itself with those high rates?

That is why a depression is going to happen. It may be worse for the USD because the US has done the most borrowing...

[c1ue]

Re: Deflation alert: Fed to provide $7.7 trillion

The question of inflation or a run on the dollar is too binary.

From a 'beggar thy neighbor' trade war viewpoint, clearly the dollar is advantaged in being fiat of the US government, but disadvantaged with regards to normal currency manipulation methods: i.e. CB interest rates.

Note, however, that the process of fully deploying the US government's dollar creation will - sooner or later - result in not just a weaker dollar, but a loss of faith.

The 'beggar thy neighbor' interest rate wars are thus actually good for the dollar short term in the sense of making it stronger. Only now are we starting to see the US government's trump card capabilities.

However the next, or actually parallel, round of 'beggar thy neighbor' is in the stimulus sense.

While there are going to be gyrations, ultimately the nations which produce value will be able to divert said value to action.

The US is uniquely handicapped in this regard: needing to both stimulate and depreciate, the result may very well be a self-reinforcing negative spiral. Even as this occurs, the other nation's packages may be 'crowding out' much of the hoped for American stimulus effects.

If money is equally available in the US and other nations for 'green' development, is it realistic to expect the entrepreneurs to still work in the US?

Just as offshoring is made into a 'no brainer' by much lower labor costs and lower environmental regulatory burden, so potentially too is offshoring entrepreneurship and invention via equally available funding, far lower regulatory requirements, and equally subsidized domestic and international markets.

[jtabeb]

Re: Deflation alert: Fed to provide $7.7 trillion

I cant imagine how high gold is going if all currencies inflate (which is a strong possibility)

That's easy, too the moon. Why do you think I buy so much of it.

[audrey_girl]

Re: Deflation alert: Fed to provide $7.7 trillion

That's easy, too the moon. Why do you think I buy so much of it.

i remember reading once that the real question is not, "How high do you think the price of gold will reach", but instead ...

"How low do you think the dollar will fall"...

if you believe (like I do) that the dollar will eventually reach zero, then the price of gold will technically reach INFINITY.....