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Is This The Chart Of A Broken Inflation Transmission Mechanism?

Tyler Durden's picture





 

Sean Corrigan presents an interesting chart for everyone who still believes that, contrary to millennia of evidence otherwise, money is not fungible. Such as the Lerry Meyers of the world, who in a CNBC interview earlier said the following: "I’m sorry, I’m sorry, you think he doesn't have the right model of inflation, he would allow hyperinflation. Not a prayer. Not a prayer.  If you wanted to forecast inflation three or four years out and you don't have it close to 2%, I don't know why. Balance sheet, no impact. Level of reserves, no impact, so you have a different model of inflation, hey, you like the hawk on the committee, you got good company." (coupled with a stunning pronouncement by Steve Liesman: "I think the Fed is going to be dead wrong on inflation. I think inflation is going up." - yes, quite curious for a man who for the longest time has been arguing just the opposite: 5 minutes into the clip). Because despite what monetary theorists say, monetary practitioners know that money always finds a way to go from point A (even, or especially if, said point is defined as "excess reserves" which in a stationary phase generate a ridiculously low cash yield) to point B, where point B are risk assets that generate the highest returns. Such as high beta stocks (and of course crude and other hard commodities). And the following chart of Inside vs Outside Money from Sean Corrigan shows precisely how this is accomplished.

The explanation:

Despite a certain embarrassment along the way with rising prices last year, other people’s tightening efforts (notably in the emerging market engines of recovery) have spared Ben much difficult decisionmaking. Fortuitously, too, a goodly portion of the inflationary injection has stuck anomalously to the fingers of a corporate sector saddled with an unusual degree of certainty about its members’ individual prospects as well as about those relating to the fiscal and regulatory environment at large.

 

Thus, in devoting 85% of retained earnings—or 20% of ex-dividend, after-tax cash flow—to accumulating a $630 billion mountain of money (cash plus demand deposits) over the past 2 1/2 years, these most unlikely of ’hoarders’ have helped retard the incendiary effects of the Fed’s actions— for now.

 

This—together with the collapse in the ratio between the monetary base and the money supply itself—has fooled the more  mechanistic of the quantity theorists into believing the machinery of debasement has been broken. Meanwhile, the cranks who comprise the MMT mob are crowing that the gold bugs and associated survivalists who inhabit the wilder fringes of the hard moneyworld (whom they insist on conflating with us REAL Austrians) have again been horribly awry in uttering their cries of ’Wolf! Wolf!’

 

In truth, none of this is so hard to explain. Taking money creation itself, the LEH-AIG-EUR disruption has radically altered the normal generation of money, but has not caused its suspension. In fact, given the speed of its operation since the Crisis, we could even say its efficiency has been greatly enhanced!

 

Before that watershed, the Fed typically gave rise to around one quarter of the nation’s money (OUTSIDE the commercial banks, in the form of currency and reserve balances) while the remaining three?quarters used to be originated INSIDE the banks (by their grant of loans or their purchase of securities against the recording of a credit balance on the relevant demand deposit account in their books).

 

Since then, however, the position has been largely inverted, so that the banks themselves are now responsible for something barely in excess of two-fifths of the total, with the Fed supplying the other three?fifths through its various ’emergency’ programmes.

 

No?one should be under the illusion that just because the monetary base (the Fed’s particular contribution) has swollen dramatically in relation to the sum of the banks’ discretionary additions to it, this makes the whole any less spendable or any less assured in its provision—quite the contrary, given Mr Bernanke’s inflationary bent and the lack of restraint which attaches to the monstrous institution whose awful power he arbitrarily wields.

Not yet convinced? Tomorrow we will demonstrate how in Q4, 2011 the US Shadow Banking system experienced its 15th consecutive quarterly contraction, from an all time high of $20.9 trillion to just $15.1 trillion (advance teaser chart here), not even offset by the liability creation in the traditional financial system, even as US consumers finally relevered for the first time in years, as eager suckers maxing out their credit cards. All this goes to show that the Fed never had an alternative to pouring money into the system, and indeed has done so endlessly since late 2008, only taking a break in late 2011 when the baton was passed to every other central bank in the world. Now their time is over, and the baton will have to be handed back to the Fed.

Because when it comes to secular market moves, today's little bout of JPM-related euphoria will be truly transitory if not accompanied by much more printing. After all the chart below is exponential and demands a sacrifice soon: perhaps the PBoC will step in briefly, although unlike the other central banks, China's money tends to stick within its own system. As such a far bigger calf will be required.

Which means that far all its hawkish bluster, today's move by the Fed is to be faded, although not before the market will permit sticky energy asset prices to collapse: meaning more outside money injections are coming. Yes, stocks may go even higher briefly, but for all intents and purposes unless accompanied by even more liquidity, the latest peak in stocks will be just like that in April of 2011: short-lived (and yes, we do find it curious how 2012 still continues to play out just like a carbon copy of 2011 YTD).

The end result of the exponential surge in outside money is, sadly we must admit, one which will make Liesman correct. For once. Because, as our earlier anecdote on Weimar showed, this is all precisely just as the Fed has intended from the beginning.

 


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Tue, 03/13/2012 - 21:09 | Link to Comment fonzannoon
fonzannoon's picture

anyone see the Kyle Bass interview with Pisani? It was a little bit of a bummer.

Tue, 03/13/2012 - 21:12 | Link to Comment sIewie the pi-rat
sIewie the pi-rat's picture

watch CNBS you support CNBS

use comcrap you support CNBS

etc...

Tue, 03/13/2012 - 21:52 | Link to Comment economics1996
economics1996's picture

 

I am a little surprised at Bass’s lack of understanding of the gold standard.  With gold/silver the banks would issue their own currency with 100% reserve requirements.  There would be no “tying the nation to a metal that comes from the ground", only tying the hands of bankers in creating money not backed by real metals.

His idea of tying currency to a basket of goods is insane.  What basket of goods?  Why not change the basket?  Who picks the basket?  Just another excuse for central bankers to print.

For those not familiar prices swarm up and down like bees in a swarm.  Trying to measure the swarm is foolish.  The CPI is nothing more than a excuse for central bankers to print.

With gold/silver restricting the money supply there would be deflation as productivity increased.  The common man could save and not have to worry about inflation like we do today. 

Bass is so disappointing in this interview.

 http://articles.businessinsider.com/2012-03-12/wall_street/31146846_1_solid-gold-cnbc-delivery

Here is a free copy of money sound and unsound that explains the concepts Bass puts forward and the fake CPI

 

 http://mises.org/books/sound_money_salerno.pdf

 

Tue, 03/13/2012 - 22:26 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

 

 

Thank God I already own nearly everything I want, or need.  For everyone else...you are fucked.

Wed, 03/14/2012 - 01:07 | Link to Comment donsluck
donsluck's picture

Food, fuel, medicine?

Wed, 03/14/2012 - 10:15 | Link to Comment Sakka
Sakka's picture

Gold + Guns + Gas + Grain + Ground = Girls

 

Chicks like surviving, they just don't appreciate what it takes until they have to escape through a sewer.

Tue, 03/13/2012 - 23:34 | Link to Comment illyia
illyia's picture

But then how would they tap the revenue stream? They might be noticed. They might have to produce something. That means work. Competition for real, material innovation.

Shucks. Savers... are... dinner. Easy.

 

Wed, 03/14/2012 - 07:58 | Link to Comment Sabremesh
Sabremesh's picture

Kyle Bass is very pro-gold as an asset for investors to own to protect their wealth. This position does not entail that he must be in favour of fixing the price of gold in fiat terms, ie creating a "gold standard". They are completely separate arguments.

Wed, 03/14/2012 - 09:39 | Link to Comment Cole Younger
Cole Younger's picture

I am for the gold standard however, I do understand that if we went back on it today the price / wage shock would send most nations into anarchy. 

Tue, 03/13/2012 - 22:53 | Link to Comment fuu
fuu's picture

One too many pi-rats.

Tue, 03/13/2012 - 21:27 | Link to Comment hadriansnightmare
hadriansnightmare's picture

So the guy that got University of Texas to buy a billion in gold has set them up to be MF Globaled?

 

Tue, 03/13/2012 - 21:38 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

no

Tue, 03/13/2012 - 21:48 | Link to Comment piceridu
piceridu's picture

Even the great Kyle Bass doesn't want to be out of business...if we went back on the gold standard, he and every other hedgies would be toast.

Tue, 03/13/2012 - 23:39 | Link to Comment Let The Wurlitz...
Let The Wurlitzer Play's picture

You hit the nail on the head piceridu.

 

Wed, 03/14/2012 - 00:15 | Link to Comment LongBalls
LongBalls's picture

I'm sliding my virtual beer down the bar to that man.

Wed, 03/14/2012 - 05:55 | Link to Comment Amagnonx
Amagnonx's picture

Many people (including Bass) seem stuck in the paradigm that money is created by central source, that it is automatically a monopolized commodity.  The idea of using silver and gold as currency is a worthless idea if you hand over the minting or creation to a monopoly.  Money should belong to the people, anyone should be able to create whatever money they like, then allow the market to decide what it wants to use. 

If anyone could mint, or print their own money - then how would people determine what money is going to hold value over time - its fairly simple to see, when money is not monopolized, then there arent a whole lot of sane choices for what it can be.

Money is a commodity - its value lies in its monetary characteristics, divisibility, durability, acceptance, recognition of value as a payment - when you hand it over to a monopoly, then you allow whoever controls the monopoly to set the value - its price fixing.

 

So, in an indirect way, I agree with Bass - you should not have a gold standard - that implies that some central source will control it.  instead - you should simply allow silver and gold to be legally used to pay debts, and you should allow it to be issued, mninted, coined or even printed as certificates by ANYONE.  Counterfieting someone else certificate is still fraud, you dont need any new laws there - but as long as they promise to pay the bearer on demand a certain weight of a certain commodity, then the market will enforce discipline, and limit fraud.

Wed, 03/14/2012 - 09:47 | Link to Comment Cole Younger
Cole Younger's picture

"Money is a commodity - its value lies in its monetary characteristics, divisibility, durability, acceptance, recognition of value as a payment"

Money in its simplest form is labor. Commodities are born from labor. 

Wed, 03/14/2012 - 09:17 | Link to Comment Lost Wages
Lost Wages's picture

Kyle Bass bought a million dollars worth of nickels. Not sayin' that's good or bad. Just sayin'.

Tue, 03/13/2012 - 21:13 | Link to Comment Yen Cross
Yen Cross's picture

 That chopy chart through the " Aggregate" says it all.  All (3) of the charts say so. Is anyone watching that "Troglodyte" , Jon Stewart on /Left wing central?

  I stumbled across that " Haberdashery", Accidentially.   Like the " Galapagos Islands"!

Tue, 03/13/2012 - 21:13 | Link to Comment kito
kito's picture

they've banned short selling, they've banned contract law, they've banned due process......shirley they can price increases........

Tue, 03/13/2012 - 21:18 | Link to Comment jcaz
jcaz's picture

Don't call me Shirley....

Tue, 03/13/2012 - 23:14 | Link to Comment kito
kito's picture

Should read"ban" price increases....but I gather my point came across anyway...still can't adjust to this swype keyboard..... Wheres my old trusty blackberry.....

Tue, 03/13/2012 - 21:42 | Link to Comment Yen Cross
Yen Cross's picture

Who is They?

Tue, 03/13/2012 - 23:40 | Link to Comment tickhound
tickhound's picture

ya know, THEM.  The canadians.

Wed, 03/14/2012 - 03:48 | Link to Comment Uber Vandal
Uber Vandal's picture

Senator Palpatine asked Darth Vader the very same question starting at 0:29:

https://www.youtube.com/watch?v=ZODx5Z3lt_g&feature=related

Tue, 03/13/2012 - 22:10 | Link to Comment Buck Johnson
Buck Johnson's picture

They banned all that to control the market from going down and companies from going under.  But entropy happens when you continue to add variables into a system.  It gets to the point that you have no way of knowing or forecasting correctly what is coming down the line toward us.  So as that one person said that no way for Hyperinflation because his charts that bernanke sees says it won't happen is BS.  Because he can't chart correctly this highly manipulated market and it does make sense about China exporting inflation to the world along with others.  To much hot money was printed and continue to be printed and it has to go somewhere. 

The guy said you are basically saying that Bernanke is lying, I'll say it yes he is.  Because he can't go up there and say we will have massive inflation from the printing of money we have been doing and I knew it but it was done to buy time for some miracle that didn't happen.  So in Bernankes case hell yes he's going to lie.

Tue, 03/13/2012 - 21:14 | Link to Comment UP Forester
UP Forester's picture

But, but, I thought they said everything is fine, the iceberg didn't do much damage!

Tue, 03/13/2012 - 21:14 | Link to Comment tekhneek
tekhneek's picture

Well this is going to end well.

Tue, 03/13/2012 - 21:21 | Link to Comment Esso
Esso's picture

I bet not.

Tue, 03/13/2012 - 21:44 | Link to Comment Yen Cross
Yen Cross's picture

 Billable Hours?

Tue, 03/13/2012 - 21:16 | Link to Comment sablya
sablya's picture

The chart looks quite a bit like the chart of the Weimar Republic's inflation rate - ready to go ballistic.  

Tue, 03/13/2012 - 21:21 | Link to Comment MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

Beaker was bound to come around eventually. 

Remember when he cried like a girl to Tyler about his coverage? 

Tue, 03/13/2012 - 21:23 | Link to Comment DavidC
DavidC's picture

Inflation up, stocks up.

DavidC

Tue, 03/13/2012 - 21:25 | Link to Comment Joedimatteo
Joedimatteo's picture

I’ve found this post on polish blog. It is in polish so you'd better use google translator. The message is more less: high time to sell.

 

http://njusacz.blogspot.com/2012/03/czas-sprzedawac.html

 

What do you think? If there will be inflation maybe it is better to buy?

Tue, 03/13/2012 - 23:23 | Link to Comment TruthInSunshine
TruthInSunshine's picture

The hole in the theory that proclaims inflation is always (let alone often) good for equity values is that the dynamics change when the economic fundamentals (job/wage growth, asset values tied to credit, e.g. homes, suck wind, the 70% of the economy that is consumer consumption is contracting in real terms, and businesses are finding sticky prices put them in a bind between lower volume on higher pricing or margin compression, etc.) are not just bad but terrible.

When the economic fundamentals are terrible, inflation isn't the result of growing organic real demand and consumption, and leads to the opposite consequences for margins, revenue and profits, as well as leading to a negative feedback loop making employment, wages and asset values tied to credit even worse.

This is not the inflation that results from good economic times. It's inflation that results from The Bernank raping the CTRL+Print keys, during a time of serious, real economic fundamental deterioration.

Almost any alleged "bright" economic data point involving retail or home sales has a black lining; easy credit is beginning to find its way to subprime borrowers again, while a fully 1/3 of all homes being purchased are either foreclosures or short sales (it's far higher in many areas of the country) purchased for cash by speculators.

The economy is terrible and getting worse, and The Bernank is on the cusp of losing whatever inflation fighting farcical credibility he had even amongst his soon-to-be-former supporters.

Liquidity quick sand swallowing the fundamental mechanisms of whatever is left of a real economy fueled by real, organic demand by pushing prices higher and accelerating demand destruction : ---> Way to Bernankeville.

Wed, 03/14/2012 - 01:12 | Link to Comment donsluck
donsluck's picture

Hey, I resent that remark. I bought my house last year for cash proceeds from selling my house six years ago! You call me a speculator? Oops, wait a minute, maybe you're right...

Wed, 03/14/2012 - 05:46 | Link to Comment Joedimatteo
Joedimatteo's picture

Many thanks!

 

Tue, 03/13/2012 - 21:27 | Link to Comment Atomizer
Atomizer's picture

 

 

Again, this is my theory. Believe we have insider/FOMC trading by the balls. The stunt [JPM] Jamie pulled off today sent off alarm bells. 

IID Reports Downturn in Fortune 500 and Major U.S. Government Agencies Infected With DNSChanger Malware 

download Cote's March 5 order

2012-3331. Federal Register 

Lastly, JPM||Net Money Flow -$88.82 M

 

Take an old snap shot of indexes. Look very closely, you will find something very disturbing. Goodnight ZH troops.

Wed, 03/14/2012 - 02:42 | Link to Comment Non Passaran
Non Passaran's picture

Hmm, for all we know you may be spreading infected PDF files (I'm not claiming, just saying).
I didn't look at them so I've no opinion about your claims here (and which seem unclear anyway).

Tue, 03/13/2012 - 21:30 | Link to Comment Yen Cross
Yen Cross's picture

Stick to the squib! Lawyers are a dime a dozen! Ya! You know who I'm talking to!

Tue, 03/13/2012 - 22:23 | Link to Comment Albertarocks
Albertarocks's picture

Oops!  Wrong article.

Tue, 03/13/2012 - 23:16 | Link to Comment UP Forester
UP Forester's picture

This isn't about 700R4s or Turbo 350s?

Tue, 03/13/2012 - 21:37 | Link to Comment LongSoupLine
LongSoupLine's picture

 

 

I'm pretty certain Steve Liesman doesn't know and/or understand more than half the shit that flys out of his fat yapper.

Tue, 03/13/2012 - 21:45 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

again, tomorrow sounds fine!

see ya!

Tue, 03/13/2012 - 21:49 | Link to Comment azzhatter
azzhatter's picture

LIESman is what, like a Columbia journalism major who masquerades as an economist on that bullshit station. That jackoff is nothing more than a mouthpiece for the Fed and banksters. I hate that bald headed fucking goebbels prick. Hope he gets some rare untreatable painful form of contagious cancer and gives it to Bernanke and Geithner before dying a painful death

Tue, 03/13/2012 - 22:20 | Link to Comment Atomizer
Atomizer's picture

What I find funny, you have to pay to hear their past lies now a days.

 

Fed chairman Ben Bernanke will testify before the Joint Economic Committee today. Insight on the Fed's projections and how banks will fare under the stress test results, with CNBC's Steve Liesman & former New York Gov. George Pataki. [2009]

Banks & Stress Tests ||05-May-2009 at 07:31 AM EDT

 

ADD TO CART:  fund our lies & corruption by burying truths & half-truths we spun in the past.

Tue, 03/13/2012 - 21:51 | Link to Comment Unprepared
Unprepared's picture

I'd say the problem is coming from the engine itself. And the brakes. And suspension...

Tue, 03/13/2012 - 23:18 | Link to Comment UP Forester
UP Forester's picture

Maybe it's not a bus, but a Taurus....

Wed, 03/14/2012 - 01:17 | Link to Comment hidingfromhelis
hidingfromhelis's picture

...that and the ID 10T error behind the wheel.

Tue, 03/13/2012 - 21:56 | Link to Comment devo
devo's picture

Does it matter if inflation is 10%? Joe Sixpack doesn't read ZH, so he believes it's 2% and any increase in necessary goods is due to speculation, bad crops, etc. At what point does Joe Sixpack care? I think that's a good question. Because if he doesn't care, the collapse we all expect may not happen (since it has to be driven by currency failure).

Tue, 03/13/2012 - 22:39 | Link to Comment azzhatter
azzhatter's picture

Herein lies the problem. Ben is already got his rotten cock squarely in your ass. He says there is no inflation and a lot of dickhead mouthpieces repeat it as fact. I did a complete inventory of my household goods for the past year and got 8.8% not including gasoline. Fuck You Bernanke, I can figure out a shrinking package. Hope you die real soon

Tue, 03/13/2012 - 23:30 | Link to Comment TruthInSunshine
TruthInSunshine's picture

Devo, yes, Joe & Jane Sixpack will continue to believe the lies, as their purchasing power gets wasted, and then, in order to compensate for falling consumption, Bernanke will have Chinese, Brazilian and Indian consumers (with two of those three nations having major problems at the present - but I digress) bussed over to Joe & Jane Sixpack's neighborhood, so that they can buy homes and shop at the local big box and small stores, and dine at Olive Garden/Capital Grill, buy liquor from the party store and construction/home improvement materials from Lowe's and Home Despot.

These bussed-in foreigners will even offer to pay higher sales and real property taxes.

This is what will keep the American Economy growing organically and in real terms.

 

/s

Tue, 03/13/2012 - 21:59 | Link to Comment mophead
mophead's picture

Why do we continue to get deflation related articles on ZH?

Tue, 03/13/2012 - 23:18 | Link to Comment UP Forester
UP Forester's picture

So we can see your boobridge from below....

Tue, 03/13/2012 - 22:02 | Link to Comment web bot
web bot's picture

We're in trouble - I know.

But I only speak dummy and I have a question. With all of this money lent out and tied up, with no rise in M1, what event(s) will cause this money to be released... increasing the velocity of money... leading to hyperinflation.

As long as the money is not allowed to swish around.. then we don't have hyperinflation?

Please speak dummy so I can understand.  :D

Wed, 03/14/2012 - 01:21 | Link to Comment donsluck
donsluck's picture

It is intended by the FED that it swish around. That's how the FED expects to "fix" the housing market, by inducing inflation. The problem is that they also want to save the insolvent banks and offered them a nice interest rate abritrage by offering slighty more interest for their parking the money at the FED then they charged the banks to lend it to them.

This is why, when the dam bursts and the money really starts to swish around (besides in stocks) inflation will hit hard and fast.

Off topic, I wonder if their lack of prosecution of Corzine was a message to the evil commodity speculators to pull out their money from commodities and into the economy-at-large, finally getting the kind of inflation they're after.

Wed, 03/14/2012 - 02:36 | Link to Comment jimmyjames
jimmyjames's picture

I have a question. With all of this money lent out and tied up, with no rise in M1, what event(s) will cause this money to be released... increasing the velocity of money... leading to hyperinflation.

******************

I suppose they could just mail weekly checks to everyone-that would get velocity sizzling-but only after people pay off all their debt-

Other than that-i have no idea-in fact that is Bernankes problem-he cannot get the credit markets moving-other than cash for clunkers and a few other scams-such a student loans-which will be a further deflationary drag when they blow up-

 

Tue, 03/13/2012 - 22:09 | Link to Comment Paul Thomason
Wed, 03/14/2012 - 02:15 | Link to Comment robertocarlos
robertocarlos's picture

Jupiter next to Venus in the western sky is spectacular. I've no idea if it means anything.

Tue, 03/13/2012 - 22:14 | Link to Comment Downtoolong
Downtoolong's picture

It seems like this article is saying there is a big wad of new Fed money that has been jammed into the banking and financial system which the Fed intended would find its way into the main street economy. At the moment no one out there really wants the new money except dumbass credit card addicted consumers who are (fortunately for all of us) still almost tapped out. Meanwhile, all this money sits within the financial industry itself, only able to be invested in itself, causing inflation in equities, commodity futures, and other paper assets. The scary thing is what might happen to total money supply and inflation in the outside economy if those old ratios of Inside Bank Money to Fed Money creation return.

One of the best comments I read recently in a ZH post went something like “Where is the document describing the Fed’s exit plan?” Despite the fact that the Fed believes there will be no hyperinflation resulting from it's record breaking money printing spree, it wouldn’t be the first time that someone in the financial industry made a wrong market call if it did. So then what? What is the Fed’s contingency plan to undo what it has done just in case it got things wrong? How unimaginably irresponsible is it if such a plan doesn’t now exist?

 

 

Tue, 03/13/2012 - 22:24 | Link to Comment Atomizer
Atomizer's picture

It was called, American Reinvestment and Recovery Act 2009.

Still watching for my bow & arrow stock to shoot to the moon. LOL

Tue, 03/13/2012 - 23:00 | Link to Comment TruthInSunshine
TruthInSunshine's picture

Bernanke has insinuated that his exit plan was to suck up all those excess reserves via reverse repo operations when the time was right.

Good luck to him on that as doing so whips off the fig leaf that is now allowing many, many banks to pretend that they are solvent, while relying on cheap money from the fed to cover their day-to-day losses as they sit on mountains of assets either stagnating or eroding in fair market value (in real terms; not mark to unicorn terms).

Wed, 03/14/2012 - 08:03 | Link to Comment 359766
359766's picture

SHORT-TERM THINKING. Let's give a shit about tomorrow and be happy with our all time high stockmarket today. Huh Ben?

Wed, 03/14/2012 - 01:23 | Link to Comment donsluck
donsluck's picture

Maybe that's why Volcker's around. He knows how to do it!

Tue, 03/13/2012 - 22:22 | Link to Comment HurricaneSeason
HurricaneSeason's picture

I don't understand what going from a median 10 billion ounce to a median 8 billion means.

Tue, 03/13/2012 - 22:49 | Link to Comment casey13
casey13's picture

All it shows is that he does not know what causes hyperinflation. It is caused by a loss of confidence in the currency. No new money is needed just an increase in the velocity of money. The FED is playing a game and if they push it to far they will get their loss of confidence.

Tue, 03/13/2012 - 23:54 | Link to Comment non_anon
non_anon's picture

who in their right frickin' mind holds interests rates at zero from 2008 to 2014 and WTF doesn't anyone call out the Bernank on this?

Wed, 03/14/2012 - 01:25 | Link to Comment donsluck
donsluck's picture

I'm callin' you out, Bernanke!

Wed, 03/14/2012 - 08:09 | Link to Comment 359766
359766's picture

me too

Wed, 03/14/2012 - 08:10 | Link to Comment 359766
359766's picture

me too

Wed, 03/14/2012 - 00:27 | Link to Comment nah
nah's picture

the last pillar of this justice will be the cops

Wed, 03/14/2012 - 01:30 | Link to Comment robertocarlos
robertocarlos's picture

I'm still not sure how reserves get created. When I borrow money I'm responsible for paying it back. Who wills the reserves into existance and don't they have to pay it back? or is it just free money for bankers? 

Wed, 03/14/2012 - 01:41 | Link to Comment faustian bargain
faustian bargain's picture

free money...they get it from the Fed, and then they make 10x more of it for themselves, and then they get to charge people interest on the money they 'created'.

Wed, 03/14/2012 - 02:52 | Link to Comment Bastiat009
Bastiat009's picture

The gold market is saying there will be no inflation at all ... it actually is screaming deflation now. Unless gold = euro. Who knows what's going on ...

Wed, 03/14/2012 - 03:48 | Link to Comment ebworthen
ebworthen's picture

Old Steve Liesman is just priming the pump for Ben so they can raise rates and screw PM's.

Who cares if housing crashes?

Will it hurt the 1%?

Will it hurt the food stamp crowd?

No, it will hurt the middle class, again, and the middle class is the enemy of the Kleptoligarcy.

Get ready for it, rate raises coming post election, and probably taxation and the resurrection of the $600 transaction rule for any purchase or sale, especially PM's.

The FED Gorilla and the rest of the Chimps have escaped from the Zoo.

Wed, 03/14/2012 - 05:03 | Link to Comment makstyle
makstyle's picture

guys, like all the post on zerohedge about inflation, we are missing something: inflation is not only about the stock of money and CB balance sheet; it is also on the velocity of money.

 

Up to now, the velocity is close to zero and not mentioning this point is like seeing the tree but not the forest!

 

Friedman: P=M*V

Wed, 03/14/2012 - 06:18 | Link to Comment bvrulez
bvrulez's picture

what if me are experiencing a massive deflation which is just offset by the inflation the CBs create?

Wed, 03/14/2012 - 08:59 | Link to Comment Major Priapus
Major Priapus's picture

One Question to any and all - I would like to be completely certain of what I am talking about before expounding...

What exactly does "Money/pGDP (rhs)" mean?  "p"...? "rhs"?

If it really means what I think it means - I am very alarmed, given "GDP" is a hokum-cipher that fails to distinguish between wealth and debt!

Wed, 03/14/2012 - 11:11 | Link to Comment Major Priapus
Major Priapus's picture

ok ok  rhs = right hand side and p is proportion...  so now I am really alarmed.

When is a liquidity problem in fact a solvency problem?

According to those graphs - Money creation has managed to pace gdp for decades and now surpasses gdp post-the-LEH-AIG-EUR inflection point.

But what in fact is gdp?  Even if gdp were entirely a measure of funglible wealth, there would be cause for concern.  As Sean Corrigan on previous occasions elucidated all too well - gdp is a specious econcromancer's incantation that attempts to conflate debt with wealth with a wave of some Keynesian wand.

Bernanke is indeed apprentice to his master sorcerer and the future augers ill.

Consider Holland a bell-weather state; more Europhile than any other, and with a long tradition of tolerance and forbearance.  Holland will prove to play microcosm to Europe's macrocosm.

Sean Corrigan is uncannily prescient - Europe is indeed about to repeat the history of the 1930's - on more than one score.

 http://www.guardian.co.uk/business/2012/mar/13/dutch-government-lockdown-eu-rulebook?newsfeed=true

http://www.egovmonitor.com/node/47938

Wed, 03/14/2012 - 11:22 | Link to Comment Monedas
Monedas's picture

So the University of Texas DIDN'T really take delivery....not the way we define it in Missouri....show me ?    Anyone should have the right to coin their own money and even issue promissory notes and grow, eat or smoke their own vegetables !  These are pretty basic, simple freedoms !  Monedas  2012 

Wed, 03/14/2012 - 13:58 | Link to Comment wtlf555
wtlf555's picture

This chart shows very little other than monetary base is going through the roof and money per gdp is high because gdp has dropped and gdp contains a lower percentage of private activity . . . nothing to see here

The charts that interests me are Money per capita and demand deposits per capita. All this screaming of inflation! inflation! based on monetary base going through the roof is getting tiresome. Real inflation (not speculative commodities volatility) will start when people take money out of demand deposits and put it under the mattress raising demand for M1 and crashing the reserve system. Then hyperinflation would occur when people scramble to get their cash out from the mattress to buy goods or gold.

I wish ZH would stop focusing on the Fed and the Monetary base and start analyzing the factors that actually will cause inflation. I track demand deposits per cap and M1 per cap and there is little going on. Why? Again THERE IS LITTLE CORRELATION BETWEEN ZIRP, STRATOSPHERIC MB AND TRUE INFLATION (too much m1 chasing too few goods) 

I would love to see analysis on the canaries in the coal mine. Why haven't we seen a run on cash when the govt and Fed are pretty up front about monetizing the debt? What would trigger M1 per capita to start rising? IT'S NOT INCREASED MB!

I'm an economic history buff but after reading about Russia. Argentina, Austria etc I am still missing where the match that lights the fire is. IT IS NOT MB - MB IS JUST A BUNCH OF FUEL AND THE FED COULD QUADRUPLE THE FUEL BUT WITHOUT THE MATCH THERE IS NO FIRE.

 

Wed, 03/14/2012 - 13:58 | Link to Comment wtlf555
wtlf555's picture

This chart shows very little other than monetary base is going through the roof and money per gdp is high because gdp has dropped and gdp contains a lower percentage of private activity . . . nothing to see here

The charts that interests me are Money per capita and demand deposits per capita. All this screaming of inflation! inflation! based on monetary base going through the roof is getting tiresome. Real inflation (not speculative commodities volatility) will start when people take money out of demand deposits and put it under the mattress raising demand for M1 and crashing the reserve system. Then hyperinflation would occur when people scramble to get their cash out from the mattress to buy goods or gold.

I wish ZH would stop focusing on the Fed and the Monetary base and start analyzing the factors that actually will cause inflation. I track demand deposits per cap and M1 per cap and there is little going on. Why? Again THERE IS LITTLE CORRELATION BETWEEN ZIRP, STRATOSPHERIC MB AND TRUE INFLATION (too much m1 chasing too few goods) 

I would love to see analysis on the canaries in the coal mine. Why haven't we seen a run on cash when the govt and Fed are pretty up front about monetizing the debt? What would trigger M1 per capita to start rising? IT'S NOT INCREASED MB!

I'm an economic history buff but after reading about Russia. Argentina, Austria etc I am still missing where the match that lights the fire is. IT IS NOT MB - MB IS JUST A BUNCH OF FUEL AND THE FED COULD QUADRUPLE THE FUEL BUT WITHOUT THE MATCH THERE IS NO FIRE.

 

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