What are your thoughts? Housing going UP or DOWN?

[scaredyclassic]

Also stocks can and do go to zero. Isn’t money destroyed then? What if things get so bad that starts happening a lot

[bearishgurl]

[quote=jpinpb]Rich – didn’t the money disappear in a sense when housing prices went down in the form of circulation, only b/c the money was being extracted in the form of HELOCs and being spent. They certainly weren’t saving it. (savings lowest in history)

So if the price goes down, wouldn’t you consequently lose your equity extraction and money circulation? People were taking great advantage of that. Not just new, recent bubble buyers. I can’t count how many NODs I’ve come across on properties that were purchased long before our bubble. A few that should have had loans paid off in full.[/quote](emphasis added)

jpinpb, this is a little OT, but I’m assisting a friend right now with Countrywide’s “Deed-in-Lieu Plus” program to which she applied in June. No NOD has ever been filed. Through several “cash-out” refis over the years, she has managed to borrow 250% of today’s value of her property, which she purchased by herself in 1989. If Fannie Mae accepts her property, she will execute the Deed in Lieu and have 30 days to move (no rent) and $3,500 upon (a clean) move out as “walking money.” She’s already lived “mortgage-free” for two years. We should know in the next week or so.

I feel bad for her because she didn’t realize very much cash at all from these “machinations.” Aside from being reamed with usurious closing costs by several loan brokers, almost all her “cash-out” money went to attorneys as her two exes (both well off) litigated her into oblivion for 100% custody of both her kids. After all this time and money and at least 80 court hearings (some with and some w/o an atty), she was unable to raise either of her children past pre-school age. Now one is in high school and one is an adult.

Unfortunately, in CA domestic courts, money talks and other stuff walks. The (child-support) payor’s attorney’s top priority is avoiding support and the “best-interest” standard is out the window :=(

In her mid-fifties now, she is virtually starting life all over again.

[quote=jpinpb]While I understand the decrease of an item does not destroy the ability to purchase, wouldn’t it change the quantity/volume of money circulated (wealth?)

So maybe money supply isn’t the issue. Maybe it’s the distribution and spending?

I admit rudimentary knowledge on this topic. Just my observations of what’s happening. I would love to understand all this and make sense of it. I always seem to have a difficult time grasping the dynamics of it all and I appreciate your tolerance w/my questions.

Thanks for your patience on this topic. I will go back and re-read your links again to see if it sinks in.[/quote]

Yes, jp, I have a handicap making sense of all this as macro and micro-economics were the ONLY classes I needed at City College to get my Associate Degree in Bus. Admin but I never took them. Now I’m not even sure that Associate Degree would do anything for me at this late date – lol!

[bearishgurl]

[quote=jpinpb]Rich – didn’t the money disappear in a sense when housing prices went down in the form of circulation, only b/c the money was being extracted in the form of HELOCs and being spent. They certainly weren’t saving it. (savings lowest in history)

So if the price goes down, wouldn’t you consequently lose your equity extraction and money circulation? People were taking great advantage of that. Not just new, recent bubble buyers. I can’t count how many NODs I’ve come across on properties that were purchased long before our bubble. A few that should have had loans paid off in full.[/quote](emphasis added)

jpinpb, this is a little OT, but I’m assisting a friend right now with Countrywide’s “Deed-in-Lieu Plus” program to which she applied in June. No NOD has ever been filed. Through several “cash-out” refis over the years, she has managed to borrow 250% of today’s value of her property, which she purchased by herself in 1989. If Fannie Mae accepts her property, she will execute the Deed in Lieu and have 30 days to move (no rent) and $3,500 upon (a clean) move out as “walking money.” She’s already lived “mortgage-free” for two years. We should know in the next week or so.

I feel bad for her because she didn’t realize very much cash at all from these “machinations.” Aside from being reamed with usurious closing costs by several loan brokers, almost all her “cash-out” money went to attorneys as her two exes (both well off) litigated her into oblivion for 100% custody of both her kids. After all this time and money and at least 80 court hearings (some with and some w/o an atty), she was unable to raise either of her children past pre-school age. Now one is in high school and one is an adult.

Unfortunately, in CA domestic courts, money talks and other stuff walks. The (child-support) payor’s attorney’s top priority is avoiding support and the “best-interest” standard is out the window :=(

In her mid-fifties now, she is virtually starting life all over again.

[quote=jpinpb]While I understand the decrease of an item does not destroy the ability to purchase, wouldn’t it change the quantity/volume of money circulated (wealth?)

So maybe money supply isn’t the issue. Maybe it’s the distribution and spending?

I admit rudimentary knowledge on this topic. Just my observations of what’s happening. I would love to understand all this and make sense of it. I always seem to have a difficult time grasping the dynamics of it all and I appreciate your tolerance w/my questions.

Thanks for your patience on this topic. I will go back and re-read your links again to see if it sinks in.[/quote]

Yes, jp, I have a handicap making sense of all this as macro and micro-economics were the ONLY classes I needed at City College to get my Associate Degree in Bus. Admin but I never took them. Now I’m not even sure that Associate Degree would do anything for me at this late date – lol!

[bearishgurl]

[quote=jpinpb]Rich – didn’t the money disappear in a sense when housing prices went down in the form of circulation, only b/c the money was being extracted in the form of HELOCs and being spent. They certainly weren’t saving it. (savings lowest in history)

So if the price goes down, wouldn’t you consequently lose your equity extraction and money circulation? People were taking great advantage of that. Not just new, recent bubble buyers. I can’t count how many NODs I’ve come across on properties that were purchased long before our bubble. A few that should have had loans paid off in full.[/quote](emphasis added)

jpinpb, this is a little OT, but I’m assisting a friend right now with Countrywide’s “Deed-in-Lieu Plus” program to which she applied in June. No NOD has ever been filed. Through several “cash-out” refis over the years, she has managed to borrow 250% of today’s value of her property, which she purchased by herself in 1989. If Fannie Mae accepts her property, she will execute the Deed in Lieu and have 30 days to move (no rent) and $3,500 upon (a clean) move out as “walking money.” She’s already lived “mortgage-free” for two years. We should know in the next week or so.

I feel bad for her because she didn’t realize very much cash at all from these “machinations.” Aside from being reamed with usurious closing costs by several loan brokers, almost all her “cash-out” money went to attorneys as her two exes (both well off) litigated her into oblivion for 100% custody of both her kids. After all this time and money and at least 80 court hearings (some with and some w/o an atty), she was unable to raise either of her children past pre-school age. Now one is in high school and one is an adult.

Unfortunately, in CA domestic courts, money talks and other stuff walks. The (child-support) payor’s attorney’s top priority is avoiding support and the “best-interest” standard is out the window :=(

In her mid-fifties now, she is virtually starting life all over again.

[quote=jpinpb]While I understand the decrease of an item does not destroy the ability to purchase, wouldn’t it change the quantity/volume of money circulated (wealth?)

So maybe money supply isn’t the issue. Maybe it’s the distribution and spending?

I admit rudimentary knowledge on this topic. Just my observations of what’s happening. I would love to understand all this and make sense of it. I always seem to have a difficult time grasping the dynamics of it all and I appreciate your tolerance w/my questions.

Thanks for your patience on this topic. I will go back and re-read your links again to see if it sinks in.[/quote]

Yes, jp, I have a handicap making sense of all this as macro and micro-economics were the ONLY classes I needed at City College to get my Associate Degree in Bus. Admin but I never took them. Now I’m not even sure that Associate Degree would do anything for me at this late date – lol!

[bearishgurl]

[quote=jpinpb]Rich – didn’t the money disappear in a sense when housing prices went down in the form of circulation, only b/c the money was being extracted in the form of HELOCs and being spent. They certainly weren’t saving it. (savings lowest in history)

So if the price goes down, wouldn’t you consequently lose your equity extraction and money circulation? People were taking great advantage of that. Not just new, recent bubble buyers. I can’t count how many NODs I’ve come across on properties that were purchased long before our bubble. A few that should have had loans paid off in full.[/quote](emphasis added)

jpinpb, this is a little OT, but I’m assisting a friend right now with Countrywide’s “Deed-in-Lieu Plus” program to which she applied in June. No NOD has ever been filed. Through several “cash-out” refis over the years, she has managed to borrow 250% of today’s value of her property, which she purchased by herself in 1989. If Fannie Mae accepts her property, she will execute the Deed in Lieu and have 30 days to move (no rent) and $3,500 upon (a clean) move out as “walking money.” She’s already lived “mortgage-free” for two years. We should know in the next week or so.

I feel bad for her because she didn’t realize very much cash at all from these “machinations.” Aside from being reamed with usurious closing costs by several loan brokers, almost all her “cash-out” money went to attorneys as her two exes (both well off) litigated her into oblivion for 100% custody of both her kids. After all this time and money and at least 80 court hearings (some with and some w/o an atty), she was unable to raise either of her children past pre-school age. Now one is in high school and one is an adult.

Unfortunately, in CA domestic courts, money talks and other stuff walks. The (child-support) payor’s attorney’s top priority is avoiding support and the “best-interest” standard is out the window :=(

In her mid-fifties now, she is virtually starting life all over again.

[quote=jpinpb]While I understand the decrease of an item does not destroy the ability to purchase, wouldn’t it change the quantity/volume of money circulated (wealth?)

So maybe money supply isn’t the issue. Maybe it’s the distribution and spending?

I admit rudimentary knowledge on this topic. Just my observations of what’s happening. I would love to understand all this and make sense of it. I always seem to have a difficult time grasping the dynamics of it all and I appreciate your tolerance w/my questions.

Thanks for your patience on this topic. I will go back and re-read your links again to see if it sinks in.[/quote]

Yes, jp, I have a handicap making sense of all this as macro and micro-economics were the ONLY classes I needed at City College to get my Associate Degree in Bus. Admin but I never took them. Now I’m not even sure that Associate Degree would do anything for me at this late date – lol!

[bearishgurl]

[quote=jpinpb]Rich – didn’t the money disappear in a sense when housing prices went down in the form of circulation, only b/c the money was being extracted in the form of HELOCs and being spent. They certainly weren’t saving it. (savings lowest in history)

So if the price goes down, wouldn’t you consequently lose your equity extraction and money circulation? People were taking great advantage of that. Not just new, recent bubble buyers. I can’t count how many NODs I’ve come across on properties that were purchased long before our bubble. A few that should have had loans paid off in full.[/quote](emphasis added)

jpinpb, this is a little OT, but I’m assisting a friend right now with Countrywide’s “Deed-in-Lieu Plus” program to which she applied in June. No NOD has ever been filed. Through several “cash-out” refis over the years, she has managed to borrow 250% of today’s value of her property, which she purchased by herself in 1989. If Fannie Mae accepts her property, she will execute the Deed in Lieu and have 30 days to move (no rent) and $3,500 upon (a clean) move out as “walking money.” She’s already lived “mortgage-free” for two years. We should know in the next week or so.

I feel bad for her because she didn’t realize very much cash at all from these “machinations.” Aside from being reamed with usurious closing costs by several loan brokers, almost all her “cash-out” money went to attorneys as her two exes (both well off) litigated her into oblivion for 100% custody of both her kids. After all this time and money and at least 80 court hearings (some with and some w/o an atty), she was unable to raise either of her children past pre-school age. Now one is in high school and one is an adult.

Unfortunately, in CA domestic courts, money talks and other stuff walks. The (child-support) payor’s attorney’s top priority is avoiding support and the “best-interest” standard is out the window :=(

In her mid-fifties now, she is virtually starting life all over again.

[quote=jpinpb]While I understand the decrease of an item does not destroy the ability to purchase, wouldn’t it change the quantity/volume of money circulated (wealth?)

So maybe money supply isn’t the issue. Maybe it’s the distribution and spending?

I admit rudimentary knowledge on this topic. Just my observations of what’s happening. I would love to understand all this and make sense of it. I always seem to have a difficult time grasping the dynamics of it all and I appreciate your tolerance w/my questions.

Thanks for your patience on this topic. I will go back and re-read your links again to see if it sinks in.[/quote]

Yes, jp, I have a handicap making sense of all this as macro and micro-economics were the ONLY classes I needed at City College to get my Associate Degree in Bus. Admin but I never took them. Now I’m not even sure that Associate Degree would do anything for me at this late date – lol!

[Arraya]

Consumer credit has contracted 15 of the last 16 months. Bernake was just out telling lenders to make it easier for small businesses to get credit.

Credit is a money “equivalent” but not measured in M2. Some say credit is the vast majority of “money” supply. Depending on definitions.

Here’s Mish, from 2008;

”Although Japan was rapidly printing money, a destruction of credit was happening at a far greater pace. There was an overall contraction of credit in Japan for close to 5 consecutive years. Property values plunged for 18 consecutive years. The stock market plunged from 40,000 to 7,000. Cash was hoarded and the velocity of money collapsed.

These are classic symptoms of deflation that a proper definition incorporating both money supply and credit would readily catch. Those looking at consumer prices or monetary injections by the bank of Japan were far off the mark. Yes, there was deflation in Japan. Furthermore, if deflation can happen in Japan, then there is no reason why it cannot happen in the US as well.”

[Arraya]

Consumer credit has contracted 15 of the last 16 months. Bernake was just out telling lenders to make it easier for small businesses to get credit.

Credit is a money “equivalent” but not measured in M2. Some say credit is the vast majority of “money” supply. Depending on definitions.

Here’s Mish, from 2008;

”Although Japan was rapidly printing money, a destruction of credit was happening at a far greater pace. There was an overall contraction of credit in Japan for close to 5 consecutive years. Property values plunged for 18 consecutive years. The stock market plunged from 40,000 to 7,000. Cash was hoarded and the velocity of money collapsed.

These are classic symptoms of deflation that a proper definition incorporating both money supply and credit would readily catch. Those looking at consumer prices or monetary injections by the bank of Japan were far off the mark. Yes, there was deflation in Japan. Furthermore, if deflation can happen in Japan, then there is no reason why it cannot happen in the US as well.”

[Arraya]

Consumer credit has contracted 15 of the last 16 months. Bernake was just out telling lenders to make it easier for small businesses to get credit.

Credit is a money “equivalent” but not measured in M2. Some say credit is the vast majority of “money” supply. Depending on definitions.

Here’s Mish, from 2008;

”Although Japan was rapidly printing money, a destruction of credit was happening at a far greater pace. There was an overall contraction of credit in Japan for close to 5 consecutive years. Property values plunged for 18 consecutive years. The stock market plunged from 40,000 to 7,000. Cash was hoarded and the velocity of money collapsed.

These are classic symptoms of deflation that a proper definition incorporating both money supply and credit would readily catch. Those looking at consumer prices or monetary injections by the bank of Japan were far off the mark. Yes, there was deflation in Japan. Furthermore, if deflation can happen in Japan, then there is no reason why it cannot happen in the US as well.”

[Arraya]

Consumer credit has contracted 15 of the last 16 months. Bernake was just out telling lenders to make it easier for small businesses to get credit.

Credit is a money “equivalent” but not measured in M2. Some say credit is the vast majority of “money” supply. Depending on definitions.

Here’s Mish, from 2008;

”Although Japan was rapidly printing money, a destruction of credit was happening at a far greater pace. There was an overall contraction of credit in Japan for close to 5 consecutive years. Property values plunged for 18 consecutive years. The stock market plunged from 40,000 to 7,000. Cash was hoarded and the velocity of money collapsed.

These are classic symptoms of deflation that a proper definition incorporating both money supply and credit would readily catch. Those looking at consumer prices or monetary injections by the bank of Japan were far off the mark. Yes, there was deflation in Japan. Furthermore, if deflation can happen in Japan, then there is no reason why it cannot happen in the US as well.”

[Arraya]

Consumer credit has contracted 15 of the last 16 months. Bernake was just out telling lenders to make it easier for small businesses to get credit.

Credit is a money “equivalent” but not measured in M2. Some say credit is the vast majority of “money” supply. Depending on definitions.

Here’s Mish, from 2008;

”Although Japan was rapidly printing money, a destruction of credit was happening at a far greater pace. There was an overall contraction of credit in Japan for close to 5 consecutive years. Property values plunged for 18 consecutive years. The stock market plunged from 40,000 to 7,000. Cash was hoarded and the velocity of money collapsed.

These are classic symptoms of deflation that a proper definition incorporating both money supply and credit would readily catch. Those looking at consumer prices or monetary injections by the bank of Japan were far off the mark. Yes, there was deflation in Japan. Furthermore, if deflation can happen in Japan, then there is no reason why it cannot happen in the US as well.”

[Rich Toscano]

[quote=capeman]Rich – You don’t take into account the loss of money through leveraged losses in the markets. If banks will lend 1:1 for margin on stocks and a stock goes to 50% then upon liquidation the former stock owners value goes from 100% to zero. This is even more severe when looking at the leverage in futures trading and currencies. Does this destroy money? No but the deflationary effects on the former owner of the securities is multiplied much more. So when Alice goes from 3 million to zero instead of 3 million to 2 million her effect on the economy will be from something to nothing while the bank will naturally tighten it’s margin requirements thereby destroying what was liquid money. That is an apparent loss of money.[/quote]

Yes, I am taking it into account and I addressed this very objection in the snippet above. *You are talking about the ability to create new money (and to a lesser extent the effect of perceived net worth); I am talking about the stock of existing money.*

If you want to conflate those things in your own analysis feel free; but I do not conflate them because they are different phenomena and each should be addressed separately to best understand the mechanics of what is going on.

Cyphire’s post clearly stated that *asset value declines reduced the existing stock of money.* I posted to correct this misapprehension. That was all I said. Now multiple people are posting to argue as if I’d stated that asset price declines don’t inhibit future money creation (all things equal), but I never stated that and in fact I stated the opposite, per this section that I will repeat from the above post:

There are some price-deflationary effects of a widespread decline in asset prices. All the stock holders who were still holding their declining stocks would definitely feel less wealthy than they did before the price drop. It’s likely that they would accordingly reduce their spending and boost their saving, which would exert a price-deflationary effect due to reduced monetary velocity and an increased demand for cash balances. In other words, while there was no change in society’s overall ability to spend, there might well be a reduction in society’s willingness to spend. But this phenomenon is very different than the actual destruction of money or spending ability.

Lower asset prices might also make it difficult for banks holding those assets on their balance sheets to lend new money into existence. But while this puts a potential damper on new money creation, it does not destroy any existing money.

Now if you want to debate about the deflationary pressures of asset price declines by the mechanism of reducing the ability to create money in the future, feel free. (I would argue that the Fed has proven itself more than capable of overcoming that, with the evidence that money supply has grown in spite of asset price declines).

And if you want to debate about the effects of “apparent loss of money” as you put it, also feel free because that is definitely a valid topic.

But don’t jumble up perceived net worth, future money supply growth, and the size of the existing money supply as if they are one thing. They are three different factors and conflating them hopelessly confuses and already complex topic.

[Rich Toscano]

[quote=capeman]Rich – You don’t take into account the loss of money through leveraged losses in the markets. If banks will lend 1:1 for margin on stocks and a stock goes to 50% then upon liquidation the former stock owners value goes from 100% to zero. This is even more severe when looking at the leverage in futures trading and currencies. Does this destroy money? No but the deflationary effects on the former owner of the securities is multiplied much more. So when Alice goes from 3 million to zero instead of 3 million to 2 million her effect on the economy will be from something to nothing while the bank will naturally tighten it’s margin requirements thereby destroying what was liquid money. That is an apparent loss of money.[/quote]

Yes, I am taking it into account and I addressed this very objection in the snippet above. *You are talking about the ability to create new money (and to a lesser extent the effect of perceived net worth); I am talking about the stock of existing money.*

If you want to conflate those things in your own analysis feel free; but I do not conflate them because they are different phenomena and each should be addressed separately to best understand the mechanics of what is going on.

Cyphire’s post clearly stated that *asset value declines reduced the existing stock of money.* I posted to correct this misapprehension. That was all I said. Now multiple people are posting to argue as if I’d stated that asset price declines don’t inhibit future money creation (all things equal), but I never stated that and in fact I stated the opposite, per this section that I will repeat from the above post:

There are some price-deflationary effects of a widespread decline in asset prices. All the stock holders who were still holding their declining stocks would definitely feel less wealthy than they did before the price drop. It’s likely that they would accordingly reduce their spending and boost their saving, which would exert a price-deflationary effect due to reduced monetary velocity and an increased demand for cash balances. In other words, while there was no change in society’s overall ability to spend, there might well be a reduction in society’s willingness to spend. But this phenomenon is very different than the actual destruction of money or spending ability.

Lower asset prices might also make it difficult for banks holding those assets on their balance sheets to lend new money into existence. But while this puts a potential damper on new money creation, it does not destroy any existing money.

Now if you want to debate about the deflationary pressures of asset price declines by the mechanism of reducing the ability to create money in the future, feel free. (I would argue that the Fed has proven itself more than capable of overcoming that, with the evidence that money supply has grown in spite of asset price declines).

And if you want to debate about the effects of “apparent loss of money” as you put it, also feel free because that is definitely a valid topic.

But don’t jumble up perceived net worth, future money supply growth, and the size of the existing money supply as if they are one thing. They are three different factors and conflating them hopelessly confuses and already complex topic.

[Rich Toscano]

[quote=capeman]Rich – You don’t take into account the loss of money through leveraged losses in the markets. If banks will lend 1:1 for margin on stocks and a stock goes to 50% then upon liquidation the former stock owners value goes from 100% to zero. This is even more severe when looking at the leverage in futures trading and currencies. Does this destroy money? No but the deflationary effects on the former owner of the securities is multiplied much more. So when Alice goes from 3 million to zero instead of 3 million to 2 million her effect on the economy will be from something to nothing while the bank will naturally tighten it’s margin requirements thereby destroying what was liquid money. That is an apparent loss of money.[/quote]

Yes, I am taking it into account and I addressed this very objection in the snippet above. *You are talking about the ability to create new money (and to a lesser extent the effect of perceived net worth); I am talking about the stock of existing money.*

If you want to conflate those things in your own analysis feel free; but I do not conflate them because they are different phenomena and each should be addressed separately to best understand the mechanics of what is going on.

Cyphire’s post clearly stated that *asset value declines reduced the existing stock of money.* I posted to correct this misapprehension. That was all I said. Now multiple people are posting to argue as if I’d stated that asset price declines don’t inhibit future money creation (all things equal), but I never stated that and in fact I stated the opposite, per this section that I will repeat from the above post:

There are some price-deflationary effects of a widespread decline in asset prices. All the stock holders who were still holding their declining stocks would definitely feel less wealthy than they did before the price drop. It’s likely that they would accordingly reduce their spending and boost their saving, which would exert a price-deflationary effect due to reduced monetary velocity and an increased demand for cash balances. In other words, while there was no change in society’s overall ability to spend, there might well be a reduction in society’s willingness to spend. But this phenomenon is very different than the actual destruction of money or spending ability.

Lower asset prices might also make it difficult for banks holding those assets on their balance sheets to lend new money into existence. But while this puts a potential damper on new money creation, it does not destroy any existing money.

Now if you want to debate about the deflationary pressures of asset price declines by the mechanism of reducing the ability to create money in the future, feel free. (I would argue that the Fed has proven itself more than capable of overcoming that, with the evidence that money supply has grown in spite of asset price declines).

And if you want to debate about the effects of “apparent loss of money” as you put it, also feel free because that is definitely a valid topic.

But don’t jumble up perceived net worth, future money supply growth, and the size of the existing money supply as if they are one thing. They are three different factors and conflating them hopelessly confuses and already complex topic.

[Rich Toscano]

[quote=capeman]Rich – You don’t take into account the loss of money through leveraged losses in the markets. If banks will lend 1:1 for margin on stocks and a stock goes to 50% then upon liquidation the former stock owners value goes from 100% to zero. This is even more severe when looking at the leverage in futures trading and currencies. Does this destroy money? No but the deflationary effects on the former owner of the securities is multiplied much more. So when Alice goes from 3 million to zero instead of 3 million to 2 million her effect on the economy will be from something to nothing while the bank will naturally tighten it’s margin requirements thereby destroying what was liquid money. That is an apparent loss of money.[/quote]

Yes, I am taking it into account and I addressed this very objection in the snippet above. *You are talking about the ability to create new money (and to a lesser extent the effect of perceived net worth); I am talking about the stock of existing money.*

If you want to conflate those things in your own analysis feel free; but I do not conflate them because they are different phenomena and each should be addressed separately to best understand the mechanics of what is going on.

Cyphire’s post clearly stated that *asset value declines reduced the existing stock of money.* I posted to correct this misapprehension. That was all I said. Now multiple people are posting to argue as if I’d stated that asset price declines don’t inhibit future money creation (all things equal), but I never stated that and in fact I stated the opposite, per this section that I will repeat from the above post:

There are some price-deflationary effects of a widespread decline in asset prices. All the stock holders who were still holding their declining stocks would definitely feel less wealthy than they did before the price drop. It’s likely that they would accordingly reduce their spending and boost their saving, which would exert a price-deflationary effect due to reduced monetary velocity and an increased demand for cash balances. In other words, while there was no change in society’s overall ability to spend, there might well be a reduction in society’s willingness to spend. But this phenomenon is very different than the actual destruction of money or spending ability.

Lower asset prices might also make it difficult for banks holding those assets on their balance sheets to lend new money into existence. But while this puts a potential damper on new money creation, it does not destroy any existing money.

Now if you want to debate about the deflationary pressures of asset price declines by the mechanism of reducing the ability to create money in the future, feel free. (I would argue that the Fed has proven itself more than capable of overcoming that, with the evidence that money supply has grown in spite of asset price declines).

And if you want to debate about the effects of “apparent loss of money” as you put it, also feel free because that is definitely a valid topic.

But don’t jumble up perceived net worth, future money supply growth, and the size of the existing money supply as if they are one thing. They are three different factors and conflating them hopelessly confuses and already complex topic.

[Author]

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