I have probably posted this already, but it belongs here since it is a harbinger for what lies ahead for us under the current regime.
These two graphs just don't compute:
I'd say watch the Fed's EXCRESNS statements, and look for excess reserves to fall. That will mean that banks are lending. If interest rates don't rise at the same time to cause deinflation, we'll see CPI inflation to some degree, though I'm not sure how bad. As I've said before, when the floodgates open and this bailout money hits main street, there is a small chance that Helicopter Ben can navigate the necessary monetary deflation steps without screwing us, but it's going to take a fortuneteller, or a lot of luck for him to do it.
I've always wondered what would happen to a debt based economy if consumers stopped borrowing. :p I also believe this behavior thoroughly refutes the assumption that fiscal stimulus always increases demand.
Last edited by malloc; 06-28-2010 at 08:52 PM.
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