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12DrinkMore, on 2012-05-19 00:04:20, said:
That is the Bernank paper and is based on a "paper-money" system.
It is not relevant as we are in a credit based system.
The money that is in existence is 97% created as debt by the commercial banks. In order to increase the amount of money sloshing around, somebody, like you, me or a company, has to borrow it into existence. The money is "pulled" into existence, not "pushed" by the Central Bank.
The Bernank can, and has, created a humongous amount of USD's by buying up Tim's debts and other stuff, but NONE of those USD's are finding their way into your pockets. He is fighting massive DEFLATIONARY forces in asset prices, particularly treasuries and the housing market as debt now has a very bad name and is being repaid. The hyperinflation that everybody was talking about is nowhere to be seen.
I suppose that conceivably the US government could suddenly double all public sector wages, which would certainly have a few interesting effects, but they won't.
Or they could suddenly drop 200,000 into every bank account in the US. But they won't.
And the Bernank was not talking about suddenly devaluing the USD by 40%, a move he will certainly not attempt, and IMO, does not have the lever to do it anyway. He was stating that it would always be possible to maintain a positive rate of inflation. And he has managed to keep the UST's at a high price and, to some extent, prevented a massive collapse in the housing market.
I cannot see any mechanism for devaluing the USD against all currencies by 40%.
It is not relevant as we are in a credit based system.
The money that is in existence is 97% created as debt by the commercial banks. In order to increase the amount of money sloshing around, somebody, like you, me or a company, has to borrow it into existence. The money is "pulled" into existence, not "pushed" by the Central Bank.
The Bernank can, and has, created a humongous amount of USD's by buying up Tim's debts and other stuff, but NONE of those USD's are finding their way into your pockets. He is fighting massive DEFLATIONARY forces in asset prices, particularly treasuries and the housing market as debt now has a very bad name and is being repaid. The hyperinflation that everybody was talking about is nowhere to be seen.
I suppose that conceivably the US government could suddenly double all public sector wages, which would certainly have a few interesting effects, but they won't.
Or they could suddenly drop 200,000 into every bank account in the US. But they won't.
And the Bernank was not talking about suddenly devaluing the USD by 40%, a move he will certainly not attempt, and IMO, does not have the lever to do it anyway. He was stating that it would always be possible to maintain a positive rate of inflation. And he has managed to keep the UST's at a high price and, to some extent, prevented a massive collapse in the housing market.
I cannot see any mechanism for devaluing the USD against all currencies by 40%.
