Between The Numbers

Money Supply: The Myth of Hyperinflation

Mark,
I'm with you on the deflation argument, and you made some very good points. I'm not ready to give the Fed the vote of confidence that you are, but it is clear that the net effect of the Fed's policies is not currently inflationary. I think the missing ingredient here for understanding how deflationary things are is credit - and credit is contracting at a rapid pace. Money in our economy is both credit and currency, and whatever effect that printing money is having is being balanced out by a large net decrease in outstanding credit. As we discussed earlier, the complete collapse of the securitization market is putting the squeeze on companies and individuals that want to borrow. Many of the indicators out there are still deflationary (seekingalpha.com/artic...), and until credit turns around, we will be in deflation. Japan did it for decades, and so can we.