Inflation might not be coming afterall

Discussion in 'Economics' started by jueco2005, Apr 28, 2010.

  1. Although banks sit in oceans of excess reserves, it is highly probable that they will remain where they are.

    Currently, there is a dam in place preventing excess reserves from finding their way into the financial system, creating money, creating debt, creating inflation.

    Obviously it is a matter of time before such reserves start to leak out.

    In my opinion what is holding them in place is that there is virtually "noone to lend to". Both Corporations & individuals are already drowning in a ocean of debt. No wonder banks are in the speculation business vs. the lending business.

    We know the evil of banking is FRL and this is a excellent time to increase the reserve % in order to hold excess reserves in the short and long run. But obviously, the Fed has not intend to carry on such matter.

    As always we are going to witness inflation, but I highly doubt it will be as bad as many fear.
  2. Excess housing, prospect of job-killing, economy-choking higher taxes... and excess labor (plus strong competition from Chindia and illegal immegrants) are powerful deflationary forces.

    HUGE deficit spending/money pump is an inflationary "counter force".

    Which will prevail?

    Will it be first one, then the other? If so, which first?

    Place your bets and spin the wheel.
  3. same game as the last depression, banks withholding lending to cause deflation until prices of real assets drop to their liking. Then scooping them up at rock bottom prices, deploy the loans and inflate newly acquired assets create bubble repeat.

    “If all the bank loans were paid, no one could have a bank deposit,
    and there would not be a dollar of coin or currency in circulation.

    This is a staggering thought. We are completely dependent on the
    commercial Banks. Someone has to borrow every dollar we have in
    circulation, cash or credit. If the Banks create ample synthetic money
    we are prosperous; if not, we starve.

    We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is.
    It is the most important subject intelligent persons can
    investigate and reflect upon. It is so important that our present
    civilization may collapse unless it becomes widely understood and the
    defects remedied very soon.”

    Fed Credit Manager Robert Hemphill 1935
  4. Both of you make interesting comments......however dont forget that the system is already loaded up with debt. That what I call a dam of excess reserve.

    The worst thing that can happen to a central bank has happened. Liquidity trap. However the concept might defer the ending point is the weakening of the Fed to manipulate the economy trough debt issuance.

    Corporations and individuals cant absorb more debt because we are already struggling to pay the existing old one.

  5. That's deflationary, too.

    Then again, if the Fed is Hell bent on repressing deflation by printing ever larger and extraordinary amounts of money... will inflation then prevail over the deflationary forces?? Of course that's their goal, but will it work out that way?

    Place your bets and spin the wheel.
  6. I agree somewhat..............explain how the Fed will issue new currency in circulation.

    As far as I know there is only one way to do so and that precisely whey we have excess reserves.
  7. wage inflation will solve this, but since the elites are determined to destroy the middle class, i doubt this will happen.

    the other way is to reinflate an asset that most people have (housing) to keep the overall debt ratio down and start loading up again.

    the only real solution is monetary reform or the exponential debt system will eventually collapse
  8. menelaus


    The answer will be to devalue the world's currencies in concert after deflation has decimated the global economy.
  9. As Frankie Vallie sang in "Greece is the word" (pun intended):

    "Conventionality belongs to yesterday..."

    Forget the classic or monetarist definition of inflation.

    Watch what is happening to Euroland. It is not just a solvency issue. Solvency is the easiest thing to cure in a fiat system. You print. That's it. Period.

    By watching money flows, by counting money supply, you all forget the # 1 requirement of a fiat money system:


    When that shatters, then you will witness inflation. When a nation's currency becomes a hot potato being passed around as panicked investors run to TANGIBLE ASSETS - gemstones, real estate, gold, silver, etc...

    Then you will feel inflation.

    Coming to a town near you.