Saturday, June 13, 2009

The Debts of the Spenders: Inflation or Deflation? A Closer Look at the Monetary Base

Inflation or deflation? Despite what goldbugs say about money printing, the Fed has yet to increase the money supply. Instead, all that debt monetization has gone into bank reserves. Here, you can see the effects of the Fed's quantitative easing:

Unfortunately, this data only goes up till January of this year. If you want to see more timely data, I encourage you to visit Accrued Interest's web site which has a great series called "Inflation/Deflation Smackdown."

*Let us not get into an argument about whether or not the Fed's figures are "real." For all intents and purposes they are. Especially when we are here to talk about the market (which is the most important opinion). Of course, foreigners and foreign central banks have every right to be concerned about the safety of their US based assets. But so far, they are taking GREAT pains to slowly and quietly (key word) diversify themselves of dollars and bonds. Remember, foreign central banks do not buy treasuries to make a profit but to make export based policy.

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