The U.S. is not “printing money” uncontrollably and flooding the world with dollars that will...

The U.S. is not “printing money” uncontrollably and flooding the world with dollars that will lead to hyperinflation, Cullen Roche writes. "Yes, the U.S. government is running a massive $1.5T deficit, however, by any metric of money supply we can see that this is barely offsetting the continued de-leveraging that is occurring across the U.S. economy."

Comments (13)
  • Harry Tuttle
    , contributor
    Comments (2213) | Send Message
    This is incorrect. The Fed is printing LOTS of money. The banks are keeping it. Cullen does a great job of explaining it.
    8 Mar 2011, 04:56 PM Reply Like
  • Ken Hasner
    , contributor
    Comments (425) | Send Message
    I think this is a good read. The other side of the coin however is the lack of pro growth policies and structural reforms that our economy needs to compete with the emerging world. So the FED can continue to fight deflation until the cows come home, but when they get back to the barn, they are going to find a slaughterhouse instead.


    Global dynamics insist that American banks and financial intermediaries are going to do their best to deploy capital where they believe it has the greatest growth prospects.This will insure that the fight against deflation will most likely fail as the FED runs into the law of diminishing returns domestically and the next election cycle will be a referendum on failed policy.


    Booming capital markets don't necessarily employ the people that have been laid off and certainly don't benefit the people at the margins of society who don't or can't participate, the elderly, the poor, the scared.
    8 Mar 2011, 05:05 PM Reply Like
  • Duude
    , contributor
    Comments (3413) | Send Message
    "The U.S. is not “printing money” uncontrollably and flooding the world with dollars"


    This is actually kinda true. When the Fed buys treasuries they're just creating data input entries. There isn't really any cold hard cash changing hands. Likewise, the industry dealers and institutions are keeping most of their proceeds in their trading accounts as electronic inputs. That isn't to say they couldn't all cash out which would force the Fed to really print money but the Fed has always claimed they would reverse QE later anyway. We'll see.
    8 Mar 2011, 05:05 PM Reply Like
  • Harry Tuttle
    , contributor
    Comments (2213) | Send Message
    Sounds like Bill Clinton's definition of "it"


    According to that definition. They NEVER print money?
    8 Mar 2011, 08:41 PM Reply Like
  • eggfaced
    , contributor
    Comments (292) | Send Message
    The banks aren't keeping it. They are lending it back to the government so they can deficit spend.


    The Government continues to deficit spend and will do so for the foreseeable future. So QE2 keeps interest rates low (per design) and the Government can continue to borrow and spend more.
    8 Mar 2011, 05:09 PM Reply Like
  • gigeze787
    , contributor
    Comments (12) | Send Message
    Interesting semantic argument by Mr. Roche. However, the Fed's "new" money does not remain solely in the US economy. It allows the banks -- and the hedge funds they lend to -- to speculate in a global economy. While this inflationary policy may simply keep an otherwise deflating US economy treading water, it has caused significant -- and politically volatile -- inflation in the rest of the world. Hence, Tunisia, Egypt, soon Libya...and hopefully Iran.
    8 Mar 2011, 05:21 PM Reply Like
  • Ohrama
    , contributor
    Comments (568) | Send Message
    De-leveraging is needed because we have been on a spending bing for the last 30 or so years and failed to take care of the store (the USA) to bring in that extra income needed to have a cushy life. Printing money and massive federal deficits are only going to make the matters worse.
    8 Mar 2011, 05:27 PM Reply Like
  • Truth-hurts
    , contributor
    Comments (147) | Send Message
    It's printing "FRNs", and we all know that FRNs are not real money!


    8 Mar 2011, 05:58 PM Reply Like
  • tigersam
    , contributor
    Comments (1707) | Send Message
    We should print more money. There are more people in the system.
    8 Mar 2011, 07:28 PM Reply Like
  • AxiosCap
    , contributor
    Comments (312) | Send Message
    Cullen is using a technicality for his point. The fact is the Fed is printing billions monthly. No, there is no velocity attached to that money...RIGHT NOW. But who's to say it won't get circulated in the future? How does the Fed propose to drain this excess liquidity from the banks? Higher reserve requirements? If really not seen any substantive discussion about reclamation of this money. Certainly, the banks aren't going to redeem their cushy UST carry trade they have going on. If I could borrow at zero and lend for even 1% at 100x leverage I would do it in a heartbeat. If the world's central banks weren't printing money, gold would be at 800/oz or less not 1400+.


    This whole thing is a big scam and it frankly makes me sick. Talk about stealing from the working class. If regular folks (non-financially oriented) really had any idea about what was really going on there would be riots everywhere.
    8 Mar 2011, 09:43 PM Reply Like
  • D. McHattie
    , contributor
    Comments (1844) | Send Message
    Prices rise where and when money is spent.


    Even if the net money supply is not increased, even if the 'exchange' of money for financial assets just keeps pace with deleveraging, prices will rise where and when that new money is spent.


    A lot less money is spent on housing as that sector deleverages and so prices will fall. Is this deflation? Of that particular asset, yes.


    So the question becomes where and when are the dollars 'exchanged' for the worthless financial assets being spent.


    I doubt the rise in commodity and stock prices is a coincidence.
    8 Mar 2011, 10:01 PM Reply Like
  • Al in Oregon
    , contributor
    Comments (781) | Send Message
    The thought popped in my mind just recently about how futile and counterproductive it is to prosecute counterfeiters given what the Fed does for a living these days. Why do we go to such lengths and expense to shutdown the freelancers? The counterfeiters are just doing what Ben and gang are doing except that they work for a lot less. Wouldn’t it be more efficient to just outsource the Fed to private “contractors” and save the need for all that high-priced talent?


    Of course we’d lose the theatrics of Congressional oversight hearings but with all the savings of bureaucratic salaries, we could afford to hire Cirque du Soleil or the Blue Man group. That would be a lot more honest and the American public would then be getting something of value. We might as well have a good time while we're being impoverished.


    The only risk I can see is that Goldman Sachs might cut some deal with the contractors to retain their primary dealer distribution cut but there’s going to be a flaw with most any plan. There's probably no way to get rid of the vampire squids.
    8 Mar 2011, 11:57 PM Reply Like
  • richrf
    , contributor
    Comments (28) | Send Message
    It is somewhat amusing, and somewhat disgusting to have to read this kind of economic masturbation. Roche and Bernanke amuse themselves with definitions and clever arguments while people around the world are starving because of food, commodity, and energy inflation. Bernanke devalues currency, taxes interest on savings 100%, leaves no money in households thereby reducing demand and killing job growth, and gives free money to the wealthy who of course sell all the dollars they have in order to buy up and bid up every possible asset - thereby continuing to enrich themselves.


    When faced with this, we get a smirk from Bernanke's face as he explains that there is no inflation because wages are going down while everything else is going up. Am I the only one who wants to throw a pie at Bernanke and all of the politicians who have sold their constituency down the drain?
    9 Mar 2011, 02:09 AM Reply Like
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