Jesse's Café Américain Sat 2010-09-25 09:55 EDT

FOMC: Sound the Bell. School's In, Suckas

Jesse

...What the Fed cannot do is breathe vitality into a zombie economy, and provoke a sustained recovery not tied to some sort of credit bubble. That is why stagflation remains the most likely outcome until the nation obtains the will and the determination to reform the financial system and restore a balance to trade and the real economy through a commitment to sound and practical public policy not driven by self-serving economic quackery. The dollar and bonds are made stronger through a vibrant underlying economy with the ability to generate taxable income and real returns to their holders. But in the meanwhile the special interests will be served. A profound deflation and hyperinflation remain as possibilities for the future, but they will most likely be seen on the horizon in advance of their arrival as the result of some exogenous event or catastrophic failure. So far, not a glimpse...

bell; FOMC; Jesse's Café Américain; school's; sounds; SUCKAS.

Christopher Whalen Sat 2010-09-25 09:52 EDT

Double dip or global deflation?

Christopher Whalen

...Let's start with the term ``recession,'' which itself reflects the assumption that economic growth is always positive and the trend line is always upward sloping. While many economists in the U.S. remain convinced that this is an accurate descriptor, what Americans and many other people of the world need to consider is whether the assumption that the economy will grow endlessly is reasonable...much of what Americans think was real growth supported by real income and real work was, in fact, the result of deficit spending and reckless monetary expansion by the Fed, first under Alan Greenspan and now Ben Bernake...some of the leading experts in the housing sector believe that the U.S. is less than 25% through the restructuring of defaulted loans on commercial and residential real estate, and that the backlog is growing...Just as the housing sector and the related debt was the driver of the U.S. economy over the past several decades, I believe that the deflation of the housing market could spell an equally drastic period of shrinkage in economic activity in the U.S. and around the world...

Christopher Whalen; double dip; Global deflation.

zero hedge - on a long enough timeline, the survival rate for everyone drops to zero Sat 2010-09-25 09:47 EDT

Chris Whalen On The Upcoming "Worst Economic Contraction Since WWI (Forget WWII)"

Chris Whalen at Institutional Risk Analytics

The erosion of the profitability of the U.S. banking industry over the past two years under the glorious Summers-Geithner-Bernanke rescue scheme is the proverbial fly in the ointment for both major political parties. Democrats and republicans alike are going to be fed into the meat grinder over the next several years as the banking sector deals with literally hundreds of billions of dollars in direct and indirect expenses from the deflation of the mortgage bubble. For the economy, this slow process of muddle along championed by Summers and Geithner will ensure that Barack Obama becomes the Herbert Hoover of the Democratic Party. The economic carnage that will causes these losses, as we described in a recent post in Reuters, "Double Dip or Global Deflation?," is going to represent the worst economic contraction since WWI. Forget WWII. Think "shrinkage" to use the Gilded Age description for economic deflation. And frankly nothing that either the Fed or Treasury does in the near-term can change this basic economic fact of restructuring...the economic situation at BAC and among all of the legacy zombie banks continues to worsen. No amount of bullshit from Washington changes the fundamental economic situation inside the largest U.S. lenders.

Chris Whalen; dropped; Forget WWII; long; survival rate; Timeline; upcoming; worst economic contraction; WWI; zero; Zero Hedge.

PRAGMATIC CAPITALISM Mon 2010-09-20 19:18 EDT

7 WAYS TO PLAY DEFLATION

TPC

In this morning's report David Rosenberg cited the non-existent inflation trend in recent years. Rosenberg is of course very negative about the economy, but does provide some excellent thoughts on how to play the current...deflationary environment...

7 Ways; Play Deflation; PRAGMATIC CAPITALISM.

Mon 2010-09-20 10:12 EDT

Mish's Global Economic Trend Analysis: Fiat World Mathematical Model

...Conditions today are essentially the same as during the great depression...It is the destruction of credit, coupled with the fact that what the Fed is printing is not even being lent that matters...we are in deflation based on the following definitions: Inflation is a net expansion of money and credit. Deflation is a net contraction of money and credit. In both definitions, credit needs to be marked to market...the mark to market value of credit is contracting faster than base money is rising...The Fed tries to hide the contraction in the market value of bank credit by its Don't Ask, Don't Sell policy...The credit bubble that just popped exceeded that preceding the great depression, not just in the US but worldwide. Thus, it is unrealistic to expect the deflationary bust to be anything other than the biggest bust in history. Those looking for hyperinflation or even strong inflation in light of the above, are simply looking at the wrong model...

Fiat World Mathematical Model; Mish's Global Economic Trend Analysis.

Fri 2010-09-17 19:26 EDT

Memo to Obama: time to break the refinance strike by the big banks

Christopher Whalen

...The Obama Administration and the Fed have taken the position that the crisis affecting the U.S. economy and the financial sector is slowly ending. In fact, the largest banks remain profoundly troubled by bad assets on their books as well as claims against these same banks for assets sold to investors. By allowing banks to ``muddle along'' and heal these wounds using low interest rates provided by the Fed, the Obama Administration is embracing a policy of deflation that has horrible consequences for U.S. workers and households...the Obama Administration has been providing political cover for the Fed to conduct a massive, reverse Robin Hood scheme, moving trillions of dollars in resources from savers and consumers to the big banks and their share and bond holders...the Obama Administration should use the power provided in the Dodd-Frank legislation to force an accelerated cleanup of bad assets and to mandate refinancing and principal reductions for performing loans with viable borrowers...President Obama also needs to focus on the growing competitive problem in the U.S. mortgage sector...now dominated by a cozy oligopoly of Too Big To Fail banks (TBTF)...Why is there no antitrust investigation of the top banks by the Department of Justice?...

big banks; break; memo; Obama; refinance strike; Time.

Mish's Global Economic Trend Analysis Mon 2010-09-13 15:53 EDT

Debating the Flat Earth Society about Hyperinflation

Michael Shedlock

Over the past few weeks, many people have asked me to comment on John Hussman's August 23, 2010 post Why Quantitative Easing is Likely to Trigger a Collapse of the U.S. Dollar. Most wanted to know how that article changed my view regarding deflation. It didn't...I was asked about a guest post by Gonzalo Lira on Zero Hedge. I had seen the article and I made an off-the-cuff statement that the post was so silly it was not worth commenting not...Commenting on the above is tantamount to debating the flat earth society. The premise is so silly it's not worth discussing, yet here I am trapped into discussion by a mischaracterization of my statement "Hyperinflation Ends The Game"...The commonality between Zimbabwe and Weimar is they are both political events. In Zimbabwe a political event triggered capital flight, in Weimar a political event started massive printing, triggering hyperinflation...To understand how powerless the Fed is, one needs to understand the difference between credit and money, how much the former dwarfs the latter...Hyperinflation could theoretically come from massive sustained political will to bail out the little guy at the expense of the banks, the wealthy, and the political class. However, unlike Mugabe and Zimbabwe, neither the banks nor the Fed nor the political class wants to bail out the poor at the expense of the wealthy. Indeed, Bernanke's, Paulson's, and Geithner's actions to date have done the exact opposite!...

Debate; Flat Earth Society; Hyperinflation; Mish's Global Economic Trend Analysis.

Mish's Global Economic Trend Analysis Thu 2010-08-26 15:11 EDT

"Contained Depression"

Michael Shedlock

Kevin Feltes, an economist for the Jerome Levy Forecasting Center, solicited my opinion on a couple of their recent articles. Levy comes down on the side of deflation, as do I. However, the devil is in the details...That Levy managed to come to what I believe is the proper overall conclusion stems from Levy's rock-solid case presented in section 2: Why Aggressive Monetary Policy Isn't Causing and Won't Cause Inflation...

contained Depression; Mish's Global Economic Trend Analysis.

Tue 2010-08-24 20:21 EDT

Gonzalo Lira: How Hyperinflation Will Happen

Right now, we are in the middle of deflation. The Global Depression we are experiencing has squeezed both aggregate demand levels and aggregate asset prices as never before. Since the credit crunch of September 2008, the U.S. and world economies have been slowly circling the deflationary drain...For its part, the Federal Reserve has been busy propping up all assets--including Treasuries--by way of ``quantitative easing''...But this Fed policy--call it ``money-printing'', call it ``liquidity injections'', call it ``asset price stabilization''--has been overwhelmed by the credit contraction...the next step down in this world-historical Global Depression which we are experiencing will be hyperinflation...Hyperinflation is the loss of faith in the currency. Prices rise in a hyperinflationary environment just like in an inflationary environment, but they rise not because people want more money for their labor or for commodities, but because people are trying to get out of the currency. It's not that they want more money--they want less of the currency: So they will pay anything for a good which is not the currency...Treasuries are now the New and Improved Toxic Asset...there will be a commodities burp: A slight but sudden rise in the price of a necessary commodity, such as oil...asset managers will sell Treasuries...right before a largish Treasury auction. So Bernanke and the Fed will buy Treasuries, in an effort to counteract the sell-off and maintain low yields...The Fed's buying of Treasuries will occur in such a way that it will encourage asset managers to dump even more Treasuries...It will be a flash panic...By the end of that terrible day, commodites of all stripes--precious and industrial metals, oil, foodstuffs--will shoot the moon...if it doesn't happen this fall, it'll happen next fall, without question before the end of 2011...

Gonzalo Lira; happened; Hyperinflation.

Mon 2010-08-23 11:03 EDT

A Program for Monetary Reform, the 1939 Document | Economic Stability

Paul H. Douglas, Irving Fisher, et. al

[pdf download] ...Our own monetary policy should likewise be directed toward avoiding inflation as well as deflation, and in attaining and maintaining as nearly as possible full production and employment. ...[100% Reserve System] Since the fractional reserve system hampers effective control by the Monetary Authority over the volume of our circulating medium it is desirable that any bank or other agency holding deposits subject to check (demand deposits) be required to keep on hand a dollar of reserve for every dollar of such deposit, so that, in effect, deposits subject to check actually represent money held by the bank in trust for the depositor.

1939 document; Economic stability; Monetary Reform; program.

PRAGMATIC CAPITALISM Thu 2010-08-05 19:52 EDT

REGARDING THOSE ``STRONG'' CORPORATE BALANCE SHEETS

TPC

Brett Arends had an excellent piece on MarketWatch yesterday regarding the true state of US corporations...the total debts of these companies has...skyrocketed...corporations are even worse off today (in terms of debt levels) than they were when the crisis began...It's not just the consumer and banking sectors that remain overly indebted and poorly positioned in the long-run. The period of de-leveraging (balance sheet recession) is likely far from over and the continuation of the private sector weakness likely to continue until the problem of debt is accepted and dealt with...Private sector demand for debt is likely to remain very tepid and this will exacerbate the risk of deflation and economic weakness.

corporate balance sheets; PRAGMATIC CAPITALISM; strong.

Wed 2010-08-04 20:48 EDT

Janet Tavakoli: Stranguflation: Deflation and Inflation Where it Hurts America Most

Janet Tavakoli

The U.S. is suffering from high unemployment combined with too much consumer debt in a weak economy...our bloated financial sector has been sucking the life-blood out of the U.S. economy for years, and recent decisions insure it will continue to feed off taxpayers, while the host economy struggles for life...The bailouts were a perversion of capitalism and the principles upon which The Republic was founded. This was the result of influential interested parties reaching into the U.S. Treasury with no accountability. Capitalism doesn't call for bailouts, instead investors take losses. Shareholders in failed financial institutions should have been wiped out, debt holders would have had to accept discounts combined with debt for equity swaps, and financial institutions would have then been recapitalized without taxpayers footing the bill. Instead banks lobbied for relaxed accounting and ineffective "financial reform." No one, including bank managers, can tell how much capital is truly needed, and taxpayers' ongoing heavy subsidies give these financial institutions the appearance of stability.

deflation; hurting America; Inflation; Janet Tavakoli; Stranguflation.

Credit Writedowns Thu 2010-07-29 17:00 EDT

James Montier does MMT

It seems that a lot of analysts have caught onto the MMT framework popularized by the late economist Wynne Godley and made topical in this downturn by Rob Parenteau of the Richebacher Letter...Now, it's James Montier's turn...He concluded: ``There is a danger the proposed fiscal tightening in the eurozone will lead to further deflation and economic collapse. The Spanish government faces what Mr Parenteau calls ``the paradox of public thrift'': the less it borrows, the more it will end up owing. It is unfortunate that it has taken a severe global recession to vindicate Prof Godley's macroeconomic analysis. If economic policymakers start to pay more attention to financial balances, they might forestall the next crisis. European politicians might also understand the potentially dreadful consequences of their new-found frugality.'' ...A downward shift in the government's net fiscal deficit means a downward shift in the private sector's net fiscal surplus -- totally doable except for this little thing called debt in places like Spain, the US, Ireland or the UK. Moreover, the savings rate is already incredibly low in countries like the U.S. and the U.K. If the government tries to pare its fiscal deficit, the result will not be less private sector savings to meet the lower public sector deficit, but rather lower aggregate demand and a larger deficit -- that's the paradox of thrift...

credit writedowns; James Montier; MMT.

zero hedge - on a long enough timeline, the survival rate for everyone drops to zero Fri 2010-07-23 11:01 EDT

Charting The Second Half Economic Slowdown

Goldman's Jan Hatzius...summarizes all the adverse trends that continue to not be priced into stocks. He notes that while the inventory cycle has boosted growth, this artificial rise is now losing steam. Key headwinds facing the economy are that fiscal policy, which has been expansionary, has now become to restrictive; that there has been no overshoot in layoffs for a mean reversion expectation; that the labor market multiplier is very much limited; that while capital spending is just modestly above replacement levels, the large output gap suggests spending should be subdued; the housing overhang is still huge and house prices have further to fall; that there are risks to US from European crisis; that inflation is dropping (and non-existent) even as utilization is low everywhere, which creates a major deflation risk; that the scary budget deficit will destroy any hope for future fiscal stimulus as public debt is surging out of control; lastly, with Taylor-implied Fed rates expected to be negative, the Fed's monetary policy arsenal is non-existent...

chart; dropped; economic slowdown; long; survival rate; Timeline; zero; Zero Hedge.

Tue 2010-06-01 17:29 EDT

billy blog >> Blog Archive >> In the spirt of debate ... my reply

Bill Mitchell

...Steve Keen and I agreed to foster a debate about where modern monetary theory sits with his work on debt-deflation. So yesterday his blog carried the following post, which included a 1000-odd word precis written by me describing what I see as the essential characteristics of modern monetary theory. The discussion is on-going on that site and I invite you to follow it if you are interested. Rather than comment on all the comments over on Steve's site, I decided to collate them here (in part) and help develop the understanding that way. That is what follows today... We distinguish the horizontal dimension (which entails all transactions between entities in the non-government sector) from the vertical dimension (which entails all transactions between the government and non-government sector)...A properly specified model will show you emphatically that the horizontal transactions between household, firms, banks and foreigners (which is the domain of circuit theory) have to net to zero even if asset portfolios are changing in composition. For every asset created there will be a corresponding liability created at the same time...you will make errors if there is not an explicit understanding that in an accounting (stock-flow) consistent sense all these transaction will net to zero. In adopting this understanding you might abstract from analysing the vertical transactions that introduced the high-powered money in the first place, but never deny its importance in setting the scene for the horizontal transactions to occur. I think the differences between Steve's models and modern monetary theory are two-fold. First, I do not think that Steve's model is stock-flow consistent across all sectors. By leaving out the government sector (even implicitly) essential insights are lost that would avoid conclusions that do not obey basic and accepted national accounting (and financial accounting) rules. This extends to how we define money. Second, I think Steve uses accounting in a different way to that which is broadly accepted. It might be that for mathematical nicety or otherwise this is the chosen strategy but you cannot then claim that your models are ground in the operational reality of the fiat monetary system we live in. I have no problem with abstract modelling. But modern monetary theory is firmly ground in the operational reality and is totally stock-flow consistent across all sectors. If we used the same definitions and rendered Steve's model stock-flow consistent in the same way as modern monetary theory then Steve's endogenous money circuits would come up with exactly the same results as the horizontal dimensions in modern monetary theory. His results might look a bit different in accounting terms but most of the message he wishes to portray about the dangers of Ponzi stages in the private debt accumulation process would still hold.

Billy Blog; blogs Archive; Debate; reply; spirt.

Mon 2010-05-24 10:11 EDT

Hussman Funds - Weekly Market Comment: Don't Mess with Aunt Minnie - May 24, 2010

John P. Hussman

...Last week, we observed an Aunt Minnie featuring a collapse in market internals that has historically been associated with sharply negative market implications....Treasury Secretary Eddie Haskell/Timothy Geithner has scheduled a trip to Europe this week to urge European leaders "to pay better attention to potential market reactions to policy moves, and to accelerate the European rescue program." This promises to be a fiasco. What could European leaders possibly find more arrogant than to be lectured on bailout policy - not simply by the U.S., but specifically by a one-trick pony bureaucrat whose chief trick is the ability to smoothly talk the language of prudence while simultaneously pillaging the fiscal stability of an entire nation for the benefit of bondholders who made bad loans?...Providing Greece (and possibly some of its neighbors) a graceful exit from the Euro requires greater courage but lower ultimate cost - particularly to the citizens of Greece itself - than a policy of forcing heavy austerity, dislocations, and internal deflation within Greece. The effect of austerity policies will be to damage the revenue side of the Grecian economy enough to leave the deficits little changed in any event. One would like to go back a decade in time and choose different policies that would have allowed Greece to maintain the Maastricht deficit limitations, but it is far too late to push a full-grown genie back into an itty-bitty bottle...

2010; 24; Aunt Minnie; Hussman Funds; Mess; weekly market comments.

Mish's Global Economic Trend Analysis Sat 2010-05-22 13:55 EDT

Richard Koo On Why This Recession Is Different; Mish On What To Do About It

Michael Shedlock

The Business Insider has a very interesting presentation by Richard Koo on The Real Reason Why This Recession Is Completely Different...The reason the recession is different is this is credit bubble busting depression not a recession. The effects are masked because of food stamps, unemployment insurance, and because of foreclosure policy...Koo blames cutbacks in fiscal stimulus in 1999 and 2001 as the reason Japan remains mired in deflation. I do not buy it...The real lesson is no matter how much money you throw around, economies cannot recover until noncollectable debts are written off...The moment fiscal stimulus stops economies are virtually guaranteed to relapse until the core problem is resolved. The problem is Asset Bubbles, Malinvestments, and debts that cannot possibly be collected...

different; Mish; Mish's Global Economic Trend Analysis; Recession; Richard Koo.

zero hedge Sat 2010-05-22 13:41 EDT

Albert Edwards: Europe Is On The Edge Of A Deflationary Precipice That Will, Paradoxically, Usher In 20-30% Inflation

A few days ago we pointed out that the latest Japanese GDP deflator came at multi-decade lows, this despite years of printing, pumping and other -ings. Today, Albert Edwards takes the observation of rampant regional deflation and concludes precisely what we have long claimed, that once rampant deflation is finally acknowledged by central bankers everywhere, and they are now running out for time, their only natural response to preserve the system will be to do what Japan has been doing for decades (successfully, they will claim) and respond with the most extreme round of monetization ever seen, "inevitably driving us towards out ultimate destination - 1970's style 20-30% inflation."...

20 30; Albert Edwards; deflationary precipice; edge; Europe; Inflation; paradox; usher; Zero Hedge.

zero hedge Fri 2010-05-21 13:45 EDT

"If The US Can Do It, So Can We": Japan To Keep Pumping Cash And Monetizing Debt Until Deflation Goes Away

And with that Japan joins the competitive devaluation currency race...Speaking before lawmakers BOJ governor Masaaki Shirakawa, who recently said Japan was powerless to fight deflation on its own, has changed his tune, and today said that Japan will print the kitchen sink if it has to to beat "stubborn deflation."...Shirakawa noted that monetization is happily chugging along: "We are buying JGBs in order to inject ample funds into financial markets in a stable manner and we are buying Y21.6 trillion of JGBs annually" and he made it clear that adjusting for scale differences, the Japanese monetization program is three times faster than the Fed's Treasury QE...

Deflation Goes Away; Japan; Keep Pumping Cash; Monetize Debt; Zero Hedge.

Wed 2010-05-19 11:40 EDT

Community Development Job Guarantee

CofFEE - Centre of Full Employment and Equity

The Centre of Full Employment and Equity has developed a sustainable path to full employment, which it calls the Job Guarantee program. A major focus of our work is on articulating this program - explaining how it works, the urgency of it, and the reasons why it is the only way to achieve full employment with price stability, a combination that has evaded most economies in the last 25 years. Under the Job Guarantee policy, the government continuously absorbs workers displaced from private sector employment. The Job Guarantee employees would be paid the minimum wage, which defines a wage floor for the economy. Government employment and spending automatically increases (decreases) as jobs are lost (gained) in the private sector. The approach generates full employment and price stability. The Job Guarantee wage provides a floor that prevents serious deflation from occurring and defines the private sector wage structure. CofFEE's latest work in this area has been developed into a proposal for a Community Development Job Guarantee (CD-JG) focussing on the long-term unemployed (people who have been unemployed longer than 12 months) and youth unemployed. These two groups have been targeted because of the severe economic and social costs that result as the period of unemployment lengthens, or when unemployment occurs at the beginning of a person's working life...

Community Development Job Guarantee.

PRAGMATIC CAPITALISM Tue 2010-05-18 15:17 EDT

11 REASON WHY DEFLATION REMAINS THE GREATER RISK

TPC

A nice follow-up here on our earlier piece. David Rosenberg has really nailed the macro picture in terms of inflation and deflation...why deflation remains the greater risk... * Credit is contracting. * Wage rates are stagnating. * Money supply growth is vanishing * The U.S. dollar is strong. * Commodities have peaked. * U.S. home prices are rolling over ... again. * Lumber prices tumbling (down nearly 17% from April 2010 highs) * Wal-Mart is cutting prices on 10,000 items. * Home Depot just cut prices on flowers, fertilizers, lawn equipment and outdoor furniture. * Taco Bell is offering two dollar combo meals. * The April U.S. retail sales report hinted at deflation in groceries, electronics, apparel and sporting goods.

11 reasons; deflation remains; greater risk; PRAGMATIC CAPITALISM.

PRAGMATIC CAPITALISM Tue 2010-05-18 15:15 EDT

A DEFLATIONARY RED FLAG IN THE $U.S. DOLLAR

TPC

...the performance of the dollar is the surest evidence of the kind of environment we're currently in. The surging dollar is a clear sign that inflation is not the concern of global investors. This is almost a sure sign that deflation is once again gripping the global economy and should be setting off red flags for equity investors around the world. The recent action in the dollar is eerily reminiscent of the peak worries in the credit crisis when deflation appeared to be taking a death grip on the global economy and demand for dollars was extremely high...As for the gold rally, I think it's clear gold is rallying in anticipation of its potential to become a future reserve currency. The potential demise of the Euro has become a rally cry for inflationistas who don't understand that the Euro is in fact another single currency system (like the gold standard) which is destined to fail. In the near-term, the rise in gold is likely justified as fear mongering and misguided governments increase demand for the yellow metal. Ultimately, I believe investors will realize that there is little to no inflation in the global economy and that the non-convertible floating exchange systems (such as the USD and JPY) are fundamentally different from the flawed currency system in place in Europe. Debt deflation continues to plague the global economy. Thus far, policymakers have been unable to fend off this wretched beast and I attribute this largely to the widespread misconceptions regarding our monetary systems. This extends to the very highest levels of government...Positioning yourself for hyperinflation and a U.S. dollar collapse has been a recipe for disaster and will continue to be a recipe for disaster as debt deflation remains the single greatest risk to the global economy.

DEFLATIONARY RED FLAG; PRAGMATIC CAPITALISM; U.S. dollar.

naked capitalism Mon 2010-04-26 10:08 EDT

Martin Wolf: China, Germany Commiting World to Deflation

...large foreign exchange surpluses, beyond what is useful to defend a currency, is NOT a sign of strength. They cannot be spent without causing the currency to appreciate, something that surplus-dependent countries are unwilling to do. Thus these holdings, which were incurred by acting as de facto export subsidies, cannot be utilized without serving as import subsidies....This battle of wills is rooted on every front in domestic politics, plus a collective inability to recognize that our current version of globalization is no longer workable. But we appear likely to test the current system to destruction rather than come up with less drastic ways out.

China; deflation; Germany Commiting World; Martin Wolf; naked capitalism.

Mon 2010-04-19 15:42 EDT

Why The World Is Headed For A Balance Sheet Recession - Credit Writedowns

...[Richard Koo] believes the US, Europe and China are headed for a period of incredibly weak consumer spending not unlike what Japan has been through...what US policymakers are trying to do is to both increase asset prices and consumption in order to short circuit the D-Process i.e. prevent the debt deflation that results from deleveraging and asset and price deflation. Almost all measures taken to date are attempts to prop up asset prices (artificially I believe)...we are in for a debt restructuring across Europe, and in America and China because of the accumulation of debt and malinvestment. Policy makers are reverting to the same old game of asset price inflation to stave this off...It leaves us with chronically weak consumption trends acutely exacerbated by the demographic trends of an aging populace...these dynamics are particularly problematic for Europe because of the strictures imposed by the Euro, the large public sector debt-to-GDP ratios and the advance age of the populace. The Greek problem is the tip of the iceberg and the Europeans are seriously deluded if they think their troubles are over...

Balance Sheet Recessions; credit writedowns; Head; world.

Jesse's Café Américain Thu 2010-04-01 08:44 EDT

The Monetary Base During the Great Depression and Today

Jesse

...I always allow that deflation and inflation are policy decisions, at some point a threshold can be passed, and the likelihood of one event or the other becomes more compelling. The US is at that crossroads wherein it must change, or go down the painful path of selective monetary default, of a degree different than a hyperinflation, more similar to that which was seen in the former Soviet Union, than the monetary implosion of a Weimar. One can watch the growth of the traditional or even innovative money supply figures, and be reassured at their nominal levels, only to misunderstand that money has a character and quantity of backing, that can erode as surely as the supply of money can increase, to produce a type of inflation that comes upon a nation quickly, like a thief in the night. It will bear the appearance of stagflation, because it is caused by a degeneration of the productive economy coupled with a disproportionately increasing money supply...

Great Depression; Jesse's Café Américain; monetary base.

Jesse's Café Américain Wed 2010-02-03 16:09 EST

On Monetary Inflation and M3

Jesse

...Within a relatively pure fiat currency system the conditions of inflation and deflation, and the broad range in between, are largely the result policy and fiscal decisions, constrained for the most part only by the acceptability of the bond and the dollar and the tolerance of the people...The acceptability of the dollar and the bond by the world is the limiting factor on the ability of the Fed and Treasury to create money, managing its supply, by whatever means direct and indirect, by action or allowance, in a fiat currency.

Jesse's Café Américain; M3; monetary inflation.

Clusterfuck Nation Sun 2010-01-31 11:40 EST

Marching Toward Zombieland

James Howard Kunstler

...The questions lately revolve around whether the nation is destroying itself by inflation or deflation - by the willful destruction of the value of our currency to evade the repayment of debt, or by the hapless destruction of households, companies, and governments by default and bankruptcy. It's a fire-or-ice debate. Either way the nation is going down as a viable enterprise. The fiction that we can return to a Crate-and-Barrel credit card orgy has sustained the false of heart and mind for some months now, but even that pleasant reverie will come to an end as the foreclosures mount. Only remember, men living in their cars who have lost nearly everything else will still have guns.

Clusterfuck Nation; March; Zombieland.

zero hedge Thu 2010-01-07 18:52 EST

David Rosenberg's 2010 Outlook "The Recession Is Really A Depression"

The credit collapse and the accompanying deflation and overcapacity are going to drive the economy and financial markets in 2010. We have said repeatedly that this recession is really a depression because the recessions of the post-WWII experience were merely small backward steps in an inventory cycle but in the context of expanding credit. Whereas now, we are in a prolonged period of credit contraction, especially as it relates to households and small businesses (as we highlighted in our small business sentiment write-up yesterday).

David Rosenberg's 2010 Outlook; Depression; really; Recession; Zero Hedge.