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In 1998, the Long Term Capital Management (LTCM) blow-up (aka "the worst financial crisis of all time,") happened. To fight the pernicious effects of this crisis, the Fed expanded its asset base, which is a fancy way of saying that they pushed a bunch of cash out into the banking system
Well, that crisis passed, and the Fed slowly re-absorbed that excess cash and returned to a more normal rate of exponential money expansion.
Then the Y2K 'crisis' came along and the Fed shoved tons of money into the banking system in anticipation of a crisis that never was. (Hey, they didn't know that.) Unfortunately, all this hot money poured onto an already-raging stock market mania and served to fuel the final blow-off that finally burst in the spring of 2000.
Then 9/11 came along, and this was by far a larger shock to the system than either of the prior crises. Again, money was shoved into the system and then reeled back in later.
Well, then, this picture will help you put this current crisis into context.
Yikes.
The opportunity for this level of monetary monkeying to end up in the hyperinflationary ditch is very, very high.
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The 1998 LTCM hedge fund bankruptcy was the worst financial crisis of all time?
Looks like they may see inflation as--the best way out--or perhaps--the only way out----With hyperinflation---the $500K house bought in 2005 and now worth $300K......may be worth $500K again and may solve their asset/liability banking crisis.
Although it may mean that we wake up to the dollar being worth 25 cents ( e.g., Argentina ) but they may see that as the lesser of two evils.....
I don't know---as Chris stated in Chapter 19...."twists and turns along the way" .... buckle your seat belts!
Chris, does this latest strong indicator of hyperinflation change your previous opinion about the data leaning towards an outcome of deflation?
Thanks,
C
Isn't it possible to have hyperinflation of goods and services whilst at the same time having deflation of assets?
And what about the following article?
Still no deflation: Disinflation then lots of inflation
Thanks for the link to the article, ninakat! It helps me start to understand the mechanics involved in inflation vs deflation a little better.
-C
Beautiful graph -- puts it all in perspective. As did Bloomberg's market summary today: the S&P 500 experienced its "worst annual drop since 1937." That bear market ended in a 50% drop (basis DJIA) in less than 13 months (10 Mar 1937 to 31 Mar 1938). Well hey, counting from the peak on 9 Oct 2007, we're tracking 1937-38 pretty well. Only another 15% to go! By the time it's over, it won't feel any worse than a mosquito bite.
Ben's frantic King Canute effort to fight the tide shows just how far the Fed went "off mission" into market manipulation, instead of tending to its statotory knitting: price stability.
Dr. Martenson has described "The End of Money." If I may be so bold, I think he meant "paper money." Like Dr. M.L. King, I have a dream: "The End of Central Banking."
Bring it, Lord!
LTCM was probably the largest nominal fiscal problem in the history of the United States (prior to this year). As a percentage of the actual economy though, it was a laugh.
But newspapers sure like their worsts. Just like we recently had the 'worst drop in the Dow ever!' (in the nominal sense anyway.)
--
Steve
"A government can't control the economy without controlling people" -Ronald Reagan
This is how I would argue this debate. Imagine that all the money in the world is like a giant growing swamp of bees. It is getting bigger all the time by the actions of central banks (ie, the debt is getting bigger everyday). Now, currently this swamp of bees is leaving the stock market, real estate and temporily residing in Treasury...so people who are in the stock market and real estate may feel "deflation". But remember, the swamp of bees (money) is growing by the minutes (ie, debt is not being reduced). When Gold and Oil (due to peak oil) go thru the roof, I believe that this giant swamp of bees will come back and land on any stocks associated with gold and energy. Dumping gold and energy stocks right now is like dumping an oil well in exchange for pieces of papers that can be created by the government out of thin air. How foolish are people. So prices may decline, but this is definitely inflation in my view.