Monetary Inflation does NOT equal Price Inflation
There is a lot of confusion among CAPs players and the general public about the use of the term "Inflation."
In the classical sense, inflation is the increase of the money supply. How money supply is calculated varies....many economists use M1, M2, M3 and similar definitions. Alstrynomics uses M3 plus ALL OUTSTANDING CREDIT.
However, the common usage for inflation is rising prices...some limit it to commodities, and some even narrow it to specific commodities, while others apply it to rising prices in general.
Historically, increasing money supply led to rising prices. The reason was because increasing money inevitably led to the creation of increasing credit which led to higher demand forcing prices higher.
Up until recently, we NEVER had increasing money supply without increasing credit. BUT THIS TIME IS DIFFERENT. We are printing hundreds of billions of dollars and giving it to the banks, and they are hoarding it in their vaults. As a result, not only is credit not growing, it is actually contracting due to rising defaults of outstanding debt.
To give you a slightly different perspective...let's say the government printed up $36 trillion dollars of bills at KINKOs and handed over to Alstry....in effect, that would triple M2 money supply. Immediately, all the gold bugs would be screaming that gold prices are going to fly through the roof and toilet paper will cost you more than a $1 per wipe. If I went out and spent the $36 trillion into the stream of commerce........they would be dead on and America would be booming like never before.............................HOWEVER.....if I took all those bills, and stuck them in my buddies warehouses.................it would have absolutely NO impact on the price of toilet paper or anything else for that matter because supply and demand would remain unaffected by the printing.
In the latter case, we would have massive printing of money, literally, but no impact on prices. How many would call it inflationary even though in the classical sense it was massively inflationary?
As a result...many are screaming that today's move by the Fed was price inflationary and is going to stimulate the economy.....not a chance my friends. Watch over the next few weeks....the dollar will likely regain strength against foreign currencies and interest rates will start climbing to even higher levels then they were before they crashed today as holders of our debt demand higher interest rates for the dilution of the currency.
Today's move will only accellerate the contraction of the American economy by putting an additional interest burden on the American Government and American taxpayers to the banks and likely cause the DOW to drop below 4000 before the end of the summer.....maybe 3000. Does anyone know for sure.....not a chance.
But based on my survey of contacts today....Alstrynomic's FU Virus is spreading....and spreading fast.....anyone with documented cases please comment below. I just had a friend inform me that Dell is initiating material layoffs in Austin.
Anyone?? Anyone?? Bueller???