Money Supply

[ucodegen]

When thinking of the ‘bailout’, I propose some questions to think about before making a decision. Even if you have already decided your opinion, I would suggest thinking about the following:

What happens to an economic system when the total money supply is suddenly reduced, let us say by about 30%? What things go up? Which things go down? Why? Does total money supply include things other than M0, M1, M2 or M3? Why? What part does the fractional reserve banking system play in all of this and why? – I am not looking for finger pointing and sound bites here. We have enough of that going on in our media and Congress.

Here is some background:
In 1929, the stock market crash significantly reduced the total money supply. In this case, the money was backed by gold, but gold standards do not take into account lending based upon assets and their value. During the crash, people were converting their dollars to gold. Since the U.S. had a gold backed currency, this reduced the amount of money (M0) that was available to the public and businesses. Roosevelt needed to increase the money supply to allow businesses to borrow and grow (and contribute to the job base). Because the currency was ‘gold’ based, and there was a run on the metal with people converting the dollars to gold, Roosevelt couldn’t just ‘issue’ more currency. The result was the Gold Confiscation Order of April 3, 1933. With the reserve having more gold on hand, it was able to issue more currency.

[peterb]

See how powerfull the gold standard is? It made FDR have to be a facist in order to screw with the system. It still didnt really help. WPA didnt save America, WWII did. Talk to anyone alive at the time. And FDR was known to try any crazy idea that an economist would suggest.

[peterb]

See how powerfull the gold standard is? It made FDR have to be a facist in order to screw with the system. It still didnt really help. WPA didnt save America, WWII did. Talk to anyone alive at the time. And FDR was known to try any crazy idea that an economist would suggest.

[peterb]

See how powerfull the gold standard is? It made FDR have to be a facist in order to screw with the system. It still didnt really help. WPA didnt save America, WWII did. Talk to anyone alive at the time. And FDR was known to try any crazy idea that an economist would suggest.

[peterb]

See how powerfull the gold standard is? It made FDR have to be a facist in order to screw with the system. It still didnt really help. WPA didnt save America, WWII did. Talk to anyone alive at the time. And FDR was known to try any crazy idea that an economist would suggest.

[peterb]

See how powerfull the gold standard is? It made FDR have to be a facist in order to screw with the system. It still didnt really help. WPA didnt save America, WWII did. Talk to anyone alive at the time. And FDR was known to try any crazy idea that an economist would suggest.

[ltokuda]

Mish has a good article on the definition of “inflation” and “money supply”:

http://globaleconomicanalysis.blogspot.com/2006/02/inflation-what-heck-is-it.html

wikipedia has an article on “fractional reserve banking”, which illustrates how that affects the total potential money supply:

http://en.wikipedia.org/wiki/Fractional-reserve_banking

Given that, it seems like deflation is the most likely outcome. In times like this, I would expect asset values to decline and probably over correct. I expect to find a lot of bargains over the next few years. I’m investing very conservatively right now because I want to guarantee that I’m in the position to buy in the future. If I were to invest in something more risky, there’s probably still some opportunities on the down side. Once the bailout bill passes, I expect the markets to rally so there might be some shorting opportunities.

I’d like to hear other people’s views. I’m always interested in hearing new ideas.

[ltokuda]

Mish has a good article on the definition of “inflation” and “money supply”:

http://globaleconomicanalysis.blogspot.com/2006/02/inflation-what-heck-is-it.html

wikipedia has an article on “fractional reserve banking”, which illustrates how that affects the total potential money supply:

http://en.wikipedia.org/wiki/Fractional-reserve_banking

Given that, it seems like deflation is the most likely outcome. In times like this, I would expect asset values to decline and probably over correct. I expect to find a lot of bargains over the next few years. I’m investing very conservatively right now because I want to guarantee that I’m in the position to buy in the future. If I were to invest in something more risky, there’s probably still some opportunities on the down side. Once the bailout bill passes, I expect the markets to rally so there might be some shorting opportunities.

I’d like to hear other people’s views. I’m always interested in hearing new ideas.

[ltokuda]

Mish has a good article on the definition of “inflation” and “money supply”:

http://globaleconomicanalysis.blogspot.com/2006/02/inflation-what-heck-is-it.html

wikipedia has an article on “fractional reserve banking”, which illustrates how that affects the total potential money supply:

http://en.wikipedia.org/wiki/Fractional-reserve_banking

Given that, it seems like deflation is the most likely outcome. In times like this, I would expect asset values to decline and probably over correct. I expect to find a lot of bargains over the next few years. I’m investing very conservatively right now because I want to guarantee that I’m in the position to buy in the future. If I were to invest in something more risky, there’s probably still some opportunities on the down side. Once the bailout bill passes, I expect the markets to rally so there might be some shorting opportunities.

I’d like to hear other people’s views. I’m always interested in hearing new ideas.

[ltokuda]

Mish has a good article on the definition of “inflation” and “money supply”:

http://globaleconomicanalysis.blogspot.com/2006/02/inflation-what-heck-is-it.html

wikipedia has an article on “fractional reserve banking”, which illustrates how that affects the total potential money supply:

http://en.wikipedia.org/wiki/Fractional-reserve_banking

Given that, it seems like deflation is the most likely outcome. In times like this, I would expect asset values to decline and probably over correct. I expect to find a lot of bargains over the next few years. I’m investing very conservatively right now because I want to guarantee that I’m in the position to buy in the future. If I were to invest in something more risky, there’s probably still some opportunities on the down side. Once the bailout bill passes, I expect the markets to rally so there might be some shorting opportunities.

I’d like to hear other people’s views. I’m always interested in hearing new ideas.

[ltokuda]

Mish has a good article on the definition of “inflation” and “money supply”:

http://globaleconomicanalysis.blogspot.com/2006/02/inflation-what-heck-is-it.html

wikipedia has an article on “fractional reserve banking”, which illustrates how that affects the total potential money supply:

http://en.wikipedia.org/wiki/Fractional-reserve_banking

Given that, it seems like deflation is the most likely outcome. In times like this, I would expect asset values to decline and probably over correct. I expect to find a lot of bargains over the next few years. I’m investing very conservatively right now because I want to guarantee that I’m in the position to buy in the future. If I were to invest in something more risky, there’s probably still some opportunities on the down side. Once the bailout bill passes, I expect the markets to rally so there might be some shorting opportunities.

I’d like to hear other people’s views. I’m always interested in hearing new ideas.

[cr]

I’ve read Mish’s argument for deflation, and I don’t fully agree.

For one, I don’t think we have seen the full extent of CPI inflation as result of the Fed’s slashing of rates, weak dollar, commodity and raw material prices increases etc.

I also know that retailers are only starting to pass on price increases, and I think later this year, early next we will see those effects.

Mish’s argument is people will spend less and drive prices down, but that only goes so far, because you can’t exactly put off buying food.

The most important factor in getting the US out this recession will be job creation.

The only area I see providing that will be the retiring of baby boomers over the next decade, but that of course has it’s own implications.

Delfation will only come once our Government has thrown every good dollar they can print at the problem and still not clean up the mess, and is forced to raise rates.

Though all of those could suddenly turn for the better and we’d still be a society based on debt, and I question how long that can last.

[cr]

I’ve read Mish’s argument for deflation, and I don’t fully agree.

For one, I don’t think we have seen the full extent of CPI inflation as result of the Fed’s slashing of rates, weak dollar, commodity and raw material prices increases etc.

I also know that retailers are only starting to pass on price increases, and I think later this year, early next we will see those effects.

Mish’s argument is people will spend less and drive prices down, but that only goes so far, because you can’t exactly put off buying food.

The most important factor in getting the US out this recession will be job creation.

The only area I see providing that will be the retiring of baby boomers over the next decade, but that of course has it’s own implications.

Delfation will only come once our Government has thrown every good dollar they can print at the problem and still not clean up the mess, and is forced to raise rates.

Though all of those could suddenly turn for the better and we’d still be a society based on debt, and I question how long that can last.

[cr]

I’ve read Mish’s argument for deflation, and I don’t fully agree.

For one, I don’t think we have seen the full extent of CPI inflation as result of the Fed’s slashing of rates, weak dollar, commodity and raw material prices increases etc.

I also know that retailers are only starting to pass on price increases, and I think later this year, early next we will see those effects.

Mish’s argument is people will spend less and drive prices down, but that only goes so far, because you can’t exactly put off buying food.

The most important factor in getting the US out this recession will be job creation.

The only area I see providing that will be the retiring of baby boomers over the next decade, but that of course has it’s own implications.

Delfation will only come once our Government has thrown every good dollar they can print at the problem and still not clean up the mess, and is forced to raise rates.

Though all of those could suddenly turn for the better and we’d still be a society based on debt, and I question how long that can last.

[cr]

I’ve read Mish’s argument for deflation, and I don’t fully agree.

For one, I don’t think we have seen the full extent of CPI inflation as result of the Fed’s slashing of rates, weak dollar, commodity and raw material prices increases etc.

I also know that retailers are only starting to pass on price increases, and I think later this year, early next we will see those effects.

Mish’s argument is people will spend less and drive prices down, but that only goes so far, because you can’t exactly put off buying food.

The most important factor in getting the US out this recession will be job creation.

The only area I see providing that will be the retiring of baby boomers over the next decade, but that of course has it’s own implications.

Delfation will only come once our Government has thrown every good dollar they can print at the problem and still not clean up the mess, and is forced to raise rates.

Though all of those could suddenly turn for the better and we’d still be a society based on debt, and I question how long that can last.

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