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evan37

evan37
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  • Why Hyperinflation Is No Myth: The Shadow Banking Component [View article]
    Ok thanks for the reply Salmo, can you please explain how shadow banking activity has no effect on inflation/deflation? I don't understand truly, because they seem to be able to affect m2. Or maybe u think there wouldn't have been deflation post financial crisis? Please explain thanks
    Feb 18 05:16 PM | Likes Like |Link to Comment
  • Why Hyperinflation Is No Myth: The Shadow Banking Component [View article]
    Colin, help me understand this. Stella and Singh seem to think the negative money multiplier in the shadow banks soaked up all the bank's liquidity post 2007, so the banks are currently shoring up their balance sheets with high powered money from the fed. Thus, QE and the like have counter-acted what would have been an otherwise deflationary scenario. So, if banks are as involved in the repo markets, as your other articles suggest, then wouldn't shadow banking credit expansion AND contraction BOTH have a direct effect on inflation? I mean wouldn't banks profiting from their shadow investments be able to loan more thereby increasing m2? Thanks
    Feb 18 04:54 PM | Likes Like |Link to Comment
  • Cash Hoards On The Sidelines And The Great Rotation: Old Myths Meet A New Reality [View article]
    fair enough
    Feb 17 11:08 AM | 2 Likes Like |Link to Comment
  • Cash Hoards On The Sidelines And The Great Rotation: Old Myths Meet A New Reality [View article]
    Tack,
    You are right about money creation. The Fed has been creating high powered money that has largely replaced credit contraction (negative money multiplier) in the shadow banking system (less liquidity). That is why we have seen tepid inflation despite an enormous increase in the base. Colin Lokey wrote a good article on this, and referenced Singh and Stella, a few days ago
    http://seekingalpha.co...
    Feb 17 10:57 AM | 1 Like Like |Link to Comment
  • Cash Hoards On The Sidelines And The Great Rotation: Old Myths Meet A New Reality [View article]
    Commentator babble,
    That's also what confused me about the article. The author seems to be saying cash + bonds + stocks are a net sum zero over an extremely short investment time horizon. This is a true statement but pretty useless to making investment decisions.
    Feb 17 10:52 AM | 3 Likes Like |Link to Comment
  • Cash Hoards On The Sidelines And The Great Rotation: Old Myths Meet A New Reality [View article]
    James,
    Wow! You must be quite a sensitive guy, your aggressive reaction to my criticism is bizarre.
    Money creation/destruction is not difficult to understand, nor is the money supply M0-M4, your insinuation that I am ignorant of these basic principles strikes me as being overly defensive.
    Regardless, on a short enough time horizon, you're absolutely right, stock and bond prices can change rapidly via cash purchases with a net zero sum. This is an accounting tautology, 1 debit = 1 credit, which seems to be the basic premise of your article.
    Perhaps the mass misunderstanding of your article demonstrated here is rooted from the phrase "cash moving in from the sideline" makes readers conceptualize the movement of liquidity in and out of the market over time. I'm sorry if I (and apparently many other readers) misunderstood your premise.
    Feb 17 09:30 AM | 6 Likes Like |Link to Comment
  • Cash Hoards On The Sidelines And The Great Rotation: Old Myths Meet A New Reality [View article]
    Igor,
    I think you're the only one here who understands how money, credit creation, actually works.
    Feb 17 12:00 AM | 2 Likes Like |Link to Comment
  • Cash Hoards On The Sidelines And The Great Rotation: Old Myths Meet A New Reality [View article]
    maximumvalues,
    No! Banks don't need deposits to create loans! I just don't get how so many people can lack basic understanding of how money is created, the author included!!
    Feb 16 11:46 PM | Likes Like |Link to Comment
  • Cash Hoards On The Sidelines And The Great Rotation: Old Myths Meet A New Reality [View article]
    James,
    I reread your article and you're absolutely right. It is way too difficult to understand. Perhaps you are too brilliant for me to comprehend, but it just seems to me that you are applying accounting tautologies to the concept of creation/destruction of money, which is not how it works.
    "First, it is a fact that there is more "cash on the sidelines" around the world than ever before,"
    -Wrong, credit contraction has decreased the amount of liquidity available for investment despite central banks increasing M0. Thus, we see tepid CPI despite massive growth in M0.

    "at any given point in time, the aggregate quantity of cash, stocks and bonds held in all portfolios must remain equal no matter how many stocks and or bonds are bought or sold."
    -Again, this is absolutely wrong. Cash can increase or decrease via the money multiplier effect (positive or negative) as depositors create more accounts or pay down loans. Stock and bond value increases in anticipation of increased production and/or earnings, when your equity or bond value increases you can create additional deposits of cash at your bank if desired.
    If the premise of your article was correct, there could be no net money or wealth creation possible without money printing from the central bank (increase in M0). Of course this is not the case.
    Feb 16 10:45 PM | 4 Likes Like |Link to Comment
  • Cash Hoards On The Sidelines And The Great Rotation: Old Myths Meet A New Reality [View article]
    "Money can be created directly by the Fed via open market operations or via credit creation in the private banking system"

    That's my point. Despite whatever the Fed does via OMC to influence the base, M0, Huge amounts of money can be created or destroyed by depositors in the private and shadow banking system allowing for more cash to invest.

    Your article would be true if the money supply always remained static but it fluctuates greatly. Stella and Singh have a good paper that attributes low CPI to contraction of M3 despite expansion of M0. http://bit.ly/1076RHX
    Feb 16 10:03 PM | 3 Likes Like |Link to Comment
  • Cash Hoards On The Sidelines And The Great Rotation: Old Myths Meet A New Reality [View article]
    James, how do you factor in the money multiplier? M0 and M3 can differ greatly based on sentiment and deposit/loan creation. Huge stores of speculative wealth can evaporate (or explode) without a concomitant decline elsewhere.
    Feb 16 09:36 PM | 2 Likes Like |Link to Comment
  • A Portfolio For The Next Market Crash [View article]
    Putster,
    It happens like this. Our idiotic Federal legislators pass a hair-brained law with millions of unintended consequences, the bankers take advantage of the law and unfairly profit, then when the bubble busts we, the US taxpayer, are left with the bill.
    It reminds me of watching Gary Gensler testify about the dangers of Fannie and Freddie on Capital hill back in March of 2000. The idiots in the Clinton admin looked at him with blank stares on their faces when they heard words like "moral hazard" and "price discovery".
    The market WILL crash again because it is being fed by our central bank (no pun intended) and promoted by politicians that have little idea of the consequences of their policies.
    Feb 16 08:52 PM | 5 Likes Like |Link to Comment
  • G20 Sparks Gold's Ugly Sell-Off [View article]
    fishfryer,
    You are exactly right. Japan is the perfect example of what the US will look like in just a few years. If a central bank never allows creative destruction and asset reallocation by allowing the deflationary side of the Austrian business cycle to run its course, then you will have stagflation.
    Also, total Japanese government revenue will soon be exceeded by the interest on servicing their debt (currently above 50%). I am confounded by the doggedly persistent bond buying of the Japanese, something that is not likely to happen in the US as investors have a more independent attitude. It will be very interesting, I think when Japan has a currency crisis it will spread like wildfire to the EU and US via CB liquidity swaps. In other words, if any of the ships sink, we'll all go down together!
    Feb 16 07:33 PM | 3 Likes Like |Link to Comment
  • Is A Big Correction For Gold And Silver In The Offing? [View article]
    Strong recovery = money multiplier effect and increased velocity of money = inflation.
    Stagflation = inflation (see the second half of the word Stagflation)
    Deflation = CBs won't let it happen.

    So it comes down to this question, will CBs allow their sovereign currencies to depreciate or not. The answer is pretty obvious.
    Feb 15 09:41 PM | 3 Likes Like |Link to Comment
  • Will The Price Of Gold And Silver Keep Falling? [View article]
    RS, I think you and the Guardian believe the same thing but over different timeframes. For instance if sequestration is allowed to happen this would lead to a contraction in the economy due to less govt spending = deflation and US dollar to raise in relative value. BUt your point is well take, the Fed won't let this happen, they will try to print their way out of the deflation so in the long term you are right- to tighten fiscal policy would eventually, by following loose monetary policy, cause inflation.
    Feb 15 11:32 AM | Likes Like |Link to Comment
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