Sup Nono?
this one tends to get left out. before the Great Depression, this was the big one.more shocking than the depression of 1873
Let me try and explain the main problem with the hyperinflation predictions that ClipperNation subscribes to.
First, we need to understand the nature of the money supply. There is difference between the "monetary base" (MB) and the "broad money" (M4) supply.
MB consists of currency notes, coins and deposits held at the Fed by the banks. This is directly caused by the Federal Reserve.
M4 is broader and includes demand deposits, savings accounts, money market accounts, CDs, commercial paper, T-Bills, etc. This cannot be controlled by the Fed.
Thanks to the fractional reserve banking system, the majority of broad money created in an economy is not by the central bank, but by the commercial banks. Every time a bank makes a loan, it creates a computer entry in the borrower's account and thereby creates new broad money. In other words, commercial banks apply a "multiplier effect" on the monetary base.
In normal times (and especially during a boom), more bank loans are made and the broad money supply grows fast as the Fed increases the monetary base. When the party comes to an end, the Fed tries to print more to restart economic activity. However, if the commercial banks don't make loans at a healthy clip, the multiplier effect doesn't fully kick in. This is what we have seen since the 2008 recession. The Fed has run the printing press non-stop, but bank lending hasn't increased to their expectation because banks would rather take this excess liquidity and buy safe government bonds than make loans to small businesses and individuals.
This graph below shows what has happened to M4 (broad money) in the last few years:
To sum it up, the monetary base has increased (notes, coins, banks' Fed deposits) but broad money (money in your or my account, which determines prices and inflatin) has not increased. Hyperinflation is not very likely in such a scenario.
Just in case some of the purists consider M3 to be the more appropriate measure of broad money than M4 (M3 = M4 minus T-Bills and Commercial Paper), here is the graph of M3 over time and compared to the price of gold:
Well, correlation does not always equal causation, but isn't it funny how the trend changed soon after the democrats took congress in 2006...This graph below shows what has happened to M4 (broad money) in the last few years:
Well, correlation does not always equal causation
housing bubble was popping, recession starting
This has nothing to do with Congress, you idiot. Monetary policy is the Federal Reserve's domain. The point I'm trying to make is that money printing by the Fed in the absence of a growing economy and credit demand will have little impact on the broad money supply.
Probably, but other things did occur, like changes to stock market rules. The flow of money dramatically increased, then it looks like a few years later.... Pop...
I'm ... speechless.
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