austrian63

Are Massive Treasury Auctions Hurting the Stock Market?

Good article. Mish has some good points re: the deflationist argument however I am in the inflationist camp and believe the trend is on the inflationists side. Since the Fed was born in 1913, the U.S. Dollar has lost over 90% of its value, as a medium of exchange, to purchase other items. We may have some temporary breaks in this trend but the trend is still in place for long-term devaluations (reductions in purchasing power). This is inherent to a fiat currency regime.

Mish makes a good argument re: the destruction of credit as a precurser to deflation but I believe he overlooks the fact that even though the middle-class may be credit strapped and thus experiencing "deflation" re: their supply of money to spend, there are other recipients of the new money being created namely, as you mention above, the GS bonuses, government employees, etc. Over time, the money supply always increases and if production is falling at the same time then prices will rise even faster than they otherwise would with fewer godds and services available to purchase.

One thing is for sure, this is an argument that will continue for a time but eventually we will know who was right as we will be able to point to either actual deflation - a general decrease in prices and increased purchasing power of the U.S. Dollar or inflation - a general increase in prices and decreased purchasing power of the U.S. Dollar.

We will just have to wait and see.