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Archive for the ‘Inflation’ Category

Economic Musings IX: We could all be millionaires …

2010-04-10 3 comments

… if we hadn’t destroyed literally trillions over the last 200 years!

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Bloom of Doom VII: The Borrower of last Resort

Not so very long ago the idea had firmly taken root that the Fed was the “lender of the last resort”, meaning that if no one else would lend to banks, the Fed would, thus preventing bank runs. Now it always struck CrisisMaven as odd that banks under any circumstance should be so little creditworthy that they couldn’t get credit. After all, aren’t banks the “eponym” of creditworthy, so to speak? But that the Fed one day would need to borrow from these banks no one else would lend to is an irony of fate we need to chew on a little to fathom all its dire implications.

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Economic Fallacy V: Can CPI measure Deflation?

2010-03-23 1 comment

Economic Fallacy IV: Buyers’ Strike during Deflation?

2010-03-21 2 comments

If buyers don’t buy during a period of deflation why would sellers sell during periods of inflation? Read more…

Economic Musings IV: How Bank Robbers cause Inflation

2010-03-20 6 comments

If a robber robs a bank and runs away with the money, never gets caught or if he gets caught has spent the money before that, has that caused inflation? No – the bank now has less money and thus its money holdings have decreased exactly as much as the robber’s holdings increased. But what if the bank gets “recapitalised”? Read more…

Economic Fallacy III: Looming Deflation?

There is a wide-spread fear, not the least among leading Fed staff and many economic pundits, that we are in a period of deflation, not inflation, or, when it comes to testifying in Congress, we are only not in a period of deflation because the Fed, unlike 1929 and the years following, actively prevented it by (re)inflating the money supply, stimulating credit etc.

However, they say, things haven’t yet worked out so well that the threat of deflation has already been banned successfully. But was there ever any threat? Read more…

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