1. They have actually radically changed the definition of money to include all money AND credit. Money and credit are two completely different factors and summing them into one monolithic statistic makes no sense (not to mention hopelessly muddying up the debate by unilaterally fabricating new definitions of terms).
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No doubt, they expanded the definition and it muddies things. Whether it makes sense, is what is muddied to me. As I said before, Steve Keen did some interesting work on this subject. Under their reasoning we could have inflation, under your stricter definitions, but it still would look and feel like deflation i.e equities and commodities price collapses. If true, then it makes sense.
As of now, very little deleveraging as taken place. Which is important in regards to job growth. I believe, if we don’t get a good bit of genuine job growth more deleveraging has to take place, which, triggers deflationary pressures.
And TAE partially bases assumptions on that, which is originally based on Hyman_Minsky’s models, if we wanted to track the derivation. Basically, stating debt bubbles inherently create a ponzi dynamic.
[quote=Rich Toscano]
2. So far, the Fed has printed about a trillion and a half dollars, and the bond market has not objected at all.
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Agreed, I think this is beyond all of our pay grades to assess and is reserved to geo-political back room deals that we are not privy to. The bond market is close to 100 trillion dollars, so, I’m sure they have some say. It’s more than double the size of equities. If I had to guess, there is a limit at some point, of which I have no idea.
[quote=Rich Toscano]
3. If the Fed monetizes assets, that can get money into the real economy (eg, if it buys Treasuries, that gives new money to the govt which then spends it into the economy). Also, as with #2, the data says otherwise: they printed money in 09 and the consumer price deflation ended. Printing money isn’t “effective” in terms of making things better, but it can most certainly be “effective” in terms of ending deflation.[/quote]
Agreed, they did stop deflation and “righted” the ship, for now. However, it looks like they will have to keep up the “interventions” for years to keep it from falling and also combat consumer and lender behavior. Which is another subject all together.
Aggregate deflationary behavior is hard to combat with a printing press.
As the following chart from David Rosenberg demonstrates, consumers are retrenching, and “just saying no” to both residential and consumer loans. Earlier, we also showed that Small Businesses also contracted, demonstrating that credit demand is collapsing at every vertical of US society. As such, QE, or ever cheaper money, has and always will be a “push” phenomenon, for which there is simply no demand, in a society that has trillions more of deleveraging to undergo. And banks realize that with retail investors not participating in the stock market, and thus having nobody to offload risky exposure to, using reserves to bid up risky assets will merely result in more pain down the road once profit taking time comes and everything goes bidless. As such, as debate over the utility of QE is moot. The only question is what the Fed’s persistent desire to debase the dollar will do the perception of monetary aggregates (i.e., the stability of the dollar) and whether the demand for alternatives (such as gold) will offset the need to liquidate said alternatives as a last-ditch source of capital to cover margin calls in a deflationary vortex. Everything else is smoke and mirrors.
