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How much money supply created?

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July 06, 2010 – Comments (4)

Egads, Bernanke has created a lot of money...

If you look at housing, through credit expansion money supply increased way ahead of what Bernanke has done since the credit crisis.  

I always thought to fix the problem you'd have to have some devaluation of currency along with prices also correcting downwards.  It would have been nice to hold the financial industry responsible for their liar loans rather then bailing them out and letting them continue to rape investors and tax payers for the excessive bonuses, of which should be 100% clawed back for what they did.

It also seemed to me that the monetary expanision did not show up equally in the market.  An established business that had their expenses set did not see rising costs due to increased real estate costs.  If you look at metals, well, everyone saw cost increases for metals, which have come down since the peak.  When you look at what has happened with the money supply, well, $1 copper is never coming back and yesterday's $1 copper bottom is now probably $2.

If you compare what happened with the money supply and how it played out in housing and in minerals, well, you'd expect all your prices to triple or quadruple, and that did not happen, so the way the gross credit supply of money played out was highly imbalanced and the deleveraging of credit which works opposite to increasing the money supply are not going to correct equally across the market.

I think that probably the housing market in some areas has some pretty good deals these days.  Some places started to correct 4-5 years ago now so those place are likely no longer debt slave yourself for life if you buy.

Here's a laugh about Vancouver's housing market.  I went to go see the Olympic Village.  They are selling the units from the Olympics now.  Well, you can buy a 708 sq ft apartment for $568k.  Vancouver started to see a downward correction, but then after the Olympics there was a rash of wealthy buyer from mainland China.  Apparently some places were overbid their asking price by $100k.  That appears to have stopped again.  I also viewed an 1100 sq ft apartment with a million dollar price tag.

4 Comments – Post Your Own

#1) On July 06, 2010 at 11:00 PM, assertfalse (70.26) wrote:

"I always thought to fix the problem you'd have to have some devaluation of currency along with prices also correcting downwards"

 Is that not a contradictory statement? Falling prices (deflation) will nullify to some extent the effect of currency devaluation. Am I missing something? 

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#2) On July 07, 2010 at 12:13 AM, dwot (61.44) wrote:

assertfalse, yes, you are missing the credit expansion of the monetary supply.  I think leverage got to somewhere in the 40 to 1 ratio, where traditionally it was about 12 to 1.  So, if you double your money base, looking at it very simply, that would leave leverage still at 20 to 1.  That is still too high and the rest comes from reducing the money supply from credit.  So, ultimately you do end up with a reduced money supply overall.  It is the reduced money supply from the deleveraging of credit that reduces prices. 

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#3) On July 07, 2010 at 10:20 AM, imobillc (< 20) wrote:

Great post once again  dwot.

Mars 

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#4) On July 07, 2010 at 10:20 AM, imobillc (< 20) wrote:

Great post once again  dwot.

Mars 

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