Posted on 06/03/2013 7:00:24 AM PDT by blam
Deflation Smackdown: Bernanke’s Madcap Money Printing Fails To Boost Inflation
Economics / Deflation
Jun 03, 2013 - 02:25 PM GMT
By: Mike Whitney
“Under a fiat money system, a government… should always be able to generate increased nominal spending and inflation, even when the short-term nominal interest rate is at zero.” Ben S. Bernanke, “Deflation: Making Sure It Doesn’t Happen Here”, November, 2002"
The US economy is in a liquidity trap which means that the demand for credit is weak even though the Fed is increasing the monetary base (via the creation of reserves at the banks) and interest rates are at zero. This is a serious problem. When the private sector (businesses and consumers) reduces its borrowing, activity slows, output shrinks, unemployment rises, and the economy slips into recession. That hasn’t happened yet, mainly because government fiscal support and transfers have kept growth in the black. But there are signs that deflationary pressures are starting to build. The consumer price index (CPI) has dropped for two consecutive months, revolving credit is showing new signs of weakness, and deposits at banks still exceed loans by a significant margin. Add the $85 billion across-the-board budget cuts, (sequester) and the prospects for a second-half double-dip look quite good. Here’s a clip from an article in Reuters that helps to explain what’s going on:
“Consumer credit recorded its smallest increase in eight months in March, a possible hint that Americans are still trying to pare their debts….Revolving credit, (credit cards) fell by $1.71 billion after rising $453 million in February. Credit from depository institutions fell in March…
…student loans have been the driver of any growth in credit to households,” said Julia Coronado, chief North America economist at BNP Paribas…
(snip)
(Excerpt) Read more at marketoracle.co.uk ...
So they’ll start passing Higher Minimum/Living Wage laws.
It will.
And the longer it takes, the worse it will be.
Bernanke’s money is being used by the banks to pay off their own debt and finance huge bonuses for bank exectutives.
That would be insane..........the ‘Rats just might do it.
Deflation means less money in circulation I thought the money supply was up 1000% in the past 5 years. Depression is where prices fall. I must be shopping at all the wrong places. Jobs are depressed, and wages are depressed but everything else you need is going up. Don’t believe the government’s inflation figures the are a lie!!!
Marc Faber Is Glad He Owned Stocks, Even As He Warned Everyone Of Stock Market Doom
Meanwhile, this time I jumped head first. It hurt a little bit, but did get me the desired effect. I need a taller bunker.
The headline index unexpectedly fell to 49.0 from 50.7 last month.
Any reading below 50 on the index indicates contraction.
Depression is where prices and wages fall. I’m not seeing the prices fall but God knows with all the stimulous and printing for 4 years we should in hyper inflation by now.
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