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More on Credibility Inflation

More on Credibility Inflation

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Published by rmullis

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Published by: rmullis on Feb 19, 2012
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02/19/2012

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Takealookatthecentralbank’sefforttopropupcredibilityinflation:Thisrepresentsnewbasemoneythatwascreatedoutofnothingtopurchase“assets”fromverydesperateentitiesthatseelittleornotruevalueintheir“assets”andwouldmuchratherhavecash.Ofcoursethepurchaseswereexecutedat100centsonthedollarandreflectedamarktomodelvaluationthatisreallya“marktofantasy”valuation.Thisexplosioninbasemoneyisreversibleonlyifthemarketseesvalueinthegarbagethatresidesonthebalancesheetsandelectstobuyitback.Whendoyouthinkthatwilloccur?Itwouldrequireabigburstofcredibilityinflationwherethemarketbelievesthatcounter-partiesarebothcapableandwillingtohonortheirdebts.Yeahright.Basemoneyiswhatdefinesthevalueofacurrency.Thisisbecausethemoneyweuse,creditmoney,isbasedonandcreatedfrombasemoney.Creditmoneyiscapableofexpansionandcontraction;allthewhileitcanmaintainstablevalue.However,basemoneyisdifferentanditmustbeseenasthepotentialgenesisofcreditmoney,inamountsthatare

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