Tuesday, November 21, 2006


"Tight-Money" Bernanke Is Actually Flooding The Economy With Money

The ever-excellent Bonddad notes that Bernanke’s flooding the economy with money even as he preaches a tight monetary policy. Reason? He’s trying to engineer a soft landing for the economy, which is tottering right now under the load of debt placed on it in the last few years. It's pretty much the only option left to him at the moment, as undoing Bush's tax giveaways is unlikely at this point.

I am suspicious of all this, PW.

I wrote a long post explaining why, but my Blogger ate my homework.
Suspicious in what way?
Hm. I guess that is pretty cryptic.

I don't accept the interpretation, that the Fed is running the printing presses. Maybe yes, maybe no.

M3 is more complicated than it is portrayed, there are other explanations which people haven't considered, and no bank in its right mind would do a repo if it expected the market to drop.
Charles has it by the brass. Banks aren't going to take a repo at $0.5 mil on the expectation of unloading it at $0.3.

The point being that nobody in their right minds will be taking such properties, and there will be hundreds of thousands of such houses all hitting the market at about the same time.

"Patience is a virtue as rewarding as a new love in spring."- Poco.
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