Will it be Inflation or Deflation?Submitted by TragicHipster on Tue, 03/11/2008 - 03:06
so, yeah, we need a word to describe when the fed starts paying banks to borrow money. because, at that point, the money supply will tend towards infinity given enough time if its not stopped (like 6 months). And the value of that supply, the inverse of its rise. if it is stopped, after being fully initiated (we have til jun 1 to shut down the TAF for this reason) a credit implosion will occur and deflation will predominate, make all debts, which caused the problem, larger, given the increased value of the dollar in deflation and reliance on tangible assets and falling wages/prices.
If the fed fights deflation like that, as they give every indication
they are, we'll pass a threshold where, yes, the fed is printing
money, worth the full faith and credit of the nation, that will have
its value tend, over time, towards less than zero. Once we really
commit to crossing that line, we know where its all going to land. The now infamous TAF auctions have been "permanently temporarily" going to be happening for 6 months - struggling banks can borrow newly created money, generated by non-market based price analysis on mortgage backed debt, and do it in seclusion so no one knows what's going on.
so, what's that word, when a central bank falls down the rabbit hole and inflates at all cost in the face of a downward deflationary spiral and completely destroys the currency.
conversely, what happens if a similar scenario plays out, but
deflation, due to more quickly acting crisis and collapses, overwhelms the central banks ability to inflate?
what are these event horizon style events, one inflationary and one deflationary, called? In each case inflation or deflation overwhelms market manipulators and take on a mind of their own. How far away are we from that?
One particular lesson from Weimar Germany. Following the hyperinflation of the 1923 the currency was backed by certain property in Germany, This stabilized their currency, along with stolen gold, and lead them to unprecedented industrialization and militarization. Maybe Bernake is going to skip over the bank failures and go straight to reorganizing the value basis of green backs on the basis hundreds of billions of mortgages the Federal Reserve now owns and has nationalized?
Give me some terms to describe these black swans, please.