[ltokuda]

Just to clarify, Mish argues that “money supply” is basically defined as: cash + credit. Inflation is the increase of money supply.

One possible effect of inflation is “price inflation”. But the price of any particular item is affected by many factors. Due to globalization, the price of many products have been kept down. So even though we’ve experienced a lot of inflation over the last decade, we haven’t seen much of its effects in the CPI.

On the other hand, we have seen serious price inflation in other areas. Housing, education, and health care costs are some examples of that. Until recently, it seemed like stock prices were also experiencing price inflation. The DJIA and S&P had sustained P/E ratios that were significantly higher than their historical averages.

Inflation helped to fuel the housing bubble and the housing bubble helped to fuel inflation (via loose lending standards). As housing prices decrease and lending standards tighten, we’re seeing a contraction of credit as well. That results in deflation.

[ltokuda]

Just to clarify, Mish argues that “money supply” is basically defined as: cash + credit. Inflation is the increase of money supply.

One possible effect of inflation is “price inflation”. But the price of any particular item is affected by many factors. Due to globalization, the price of many products have been kept down. So even though we’ve experienced a lot of inflation over the last decade, we haven’t seen much of its effects in the CPI.

On the other hand, we have seen serious price inflation in other areas. Housing, education, and health care costs are some examples of that. Until recently, it seemed like stock prices were also experiencing price inflation. The DJIA and S&P had sustained P/E ratios that were significantly higher than their historical averages.

Inflation helped to fuel the housing bubble and the housing bubble helped to fuel inflation (via loose lending standards). As housing prices decrease and lending standards tighten, we’re seeing a contraction of credit as well. That results in deflation.

[ltokuda]

I think Bush and Paulson blew this from the very beginning. Their initial bill basically said:

“Give us $700 Billion dollars. We’ll spend it however we like without any oversight. And you can never hold us accountable.”

That bill screamed BAILOUT FOR WALL STREET. Even with all the negotiated changes, the bill still can’t shake that initial public image. At this point, you could come up with a bill that even Warren Buffett would want to invest money in and the public would still see it as nothing more than a bailout for wall street.

If the bill was initially written and marketed as a good investment for America, we would have all been better off. But, of course, that wasn’t Bush and Paulson’s primary concern.

[ltokuda]

I think Bush and Paulson blew this from the very beginning. Their initial bill basically said:

“Give us $700 Billion dollars. We’ll spend it however we like without any oversight. And you can never hold us accountable.”

That bill screamed BAILOUT FOR WALL STREET. Even with all the negotiated changes, the bill still can’t shake that initial public image. At this point, you could come up with a bill that even Warren Buffett would want to invest money in and the public would still see it as nothing more than a bailout for wall street.

If the bill was initially written and marketed as a good investment for America, we would have all been better off. But, of course, that wasn’t Bush and Paulson’s primary concern.

[ltokuda]

I think Bush and Paulson blew this from the very beginning. Their initial bill basically said:

“Give us $700 Billion dollars. We’ll spend it however we like without any oversight. And you can never hold us accountable.”

That bill screamed BAILOUT FOR WALL STREET. Even with all the negotiated changes, the bill still can’t shake that initial public image. At this point, you could come up with a bill that even Warren Buffett would want to invest money in and the public would still see it as nothing more than a bailout for wall street.

If the bill was initially written and marketed as a good investment for America, we would have all been better off. But, of course, that wasn’t Bush and Paulson’s primary concern.

[ltokuda]

I think Bush and Paulson blew this from the very beginning. Their initial bill basically said:

“Give us $700 Billion dollars. We’ll spend it however we like without any oversight. And you can never hold us accountable.”

That bill screamed BAILOUT FOR WALL STREET. Even with all the negotiated changes, the bill still can’t shake that initial public image. At this point, you could come up with a bill that even Warren Buffett would want to invest money in and the public would still see it as nothing more than a bailout for wall street.

If the bill was initially written and marketed as a good investment for America, we would have all been better off. But, of course, that wasn’t Bush and Paulson’s primary concern.

[ltokuda]

I think Bush and Paulson blew this from the very beginning. Their initial bill basically said:

“Give us $700 Billion dollars. We’ll spend it however we like without any oversight. And you can never hold us accountable.”

That bill screamed BAILOUT FOR WALL STREET. Even with all the negotiated changes, the bill still can’t shake that initial public image. At this point, you could come up with a bill that even Warren Buffett would want to invest money in and the public would still see it as nothing more than a bailout for wall street.

If the bill was initially written and marketed as a good investment for America, we would have all been better off. But, of course, that wasn’t Bush and Paulson’s primary concern.

[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.

[ltokuda]

KIBU, I understand how the fed can move MBS’s off a companies balance sheet. But in Paulson’s testimony, he said that the fed’s purchases of MBS’s would “prime the pump” for the market and attract other investors. That doesn’t seem possible if the fed is paying artificially high prices.

stockstradr, I’ll check out the video as you suggested. I’m a regular reader of Roubini’s blog but it will be interesting to get views from other economists as well.

[ltokuda]

KIBU, I understand how the fed can move MBS’s off a companies balance sheet. But in Paulson’s testimony, he said that the fed’s purchases of MBS’s would “prime the pump” for the market and attract other investors. That doesn’t seem possible if the fed is paying artificially high prices.

stockstradr, I’ll check out the video as you suggested. I’m a regular reader of Roubini’s blog but it will be interesting to get views from other economists as well.

[ltokuda]

KIBU, I understand how the fed can move MBS’s off a companies balance sheet. But in Paulson’s testimony, he said that the fed’s purchases of MBS’s would “prime the pump” for the market and attract other investors. That doesn’t seem possible if the fed is paying artificially high prices.

stockstradr, I’ll check out the video as you suggested. I’m a regular reader of Roubini’s blog but it will be interesting to get views from other economists as well.

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