A trip back to 1964 proves Silver creates wealth

M is bound by MB. So it's very important. QE BTW is about changing MB without changing the assets that are supposed to back it.

 

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OK I accept your opinion to refuse to believe it exists even though i've given absolute asset sheet numbers from the fed to prove it.

However my comments were directed towards the forum and I will repeat that people who hold monetary assets have to take steps to protect it against the effects of monetary inflation. Holding PM will do that.

 

I'm not sure what there is to be afraid of unless you don't have precious metals or a way to protect them. Maybe we'll all be buried in paper one day?

While the total money supply is in uncharted waters, the level of expansion is not, at least in relative terms. This same type of behavior is why we had to go off the gold standard so they could fund Viet Nam. If history is any indication the war drums are beating loudly once again, but that's no big surprise. While I do not feel warm and fuzzy about the Fed, they are doing about the only thing they can do to keep the system running based on the other factors that are (directly, though maybe not indirectly) out of their control.

 

I don't think so. When you get out to the more inclusive M's that include money market funds, MB has no impact. And don't forget all of the dollars outside of the US that might be repatriated. Many of those dollars are also reserves for banks located outside of the US, so the Fed control of that portion of the money supply is loose at best. Besides, you've never explained why you think MB is so important, and when we can expect the catastrophe to begin from its expansion, or in what form it will take.

 

OK, why did the Federal Reserve grow the base money supply by 5X in just 4 years? What was the purpose of that?

 

Common folks and even business majors like me will not know if the CFO is cooking the books like Enron. The common man is just a pawn.

 

To reliquify the banking system and try to prevent a deflationary event.

 

Prior to the Enron crash there were a number of analysts who issued sell warnings. For the common man, there is no great trick to avoiding companies like Enron that have enormous debt on the balance sheet.


Edit: This link is a good summary to dispel many myths.
http://www.bizjournals.com/birmingham/stories/2002/05/06/editorial3.html

 

So evil little CFO's like me are ruining the world? You do know that CFO's are beholden to the CEO, Chairman, and many others, right? Any CEO who blames his CFO for "cooking the books" is either an imcompetent blathering idiot, (and not many of them usually become CEO), or is lying to your face.

Anyway, the solution to such dangers has always been simple to me. UNDERSTAND how the company you invest in operates. Look at the assets they have, what products or services they make, how their margins are, and how net income is derived. I took a good look at Enron 3 years before the implosion and walked away shaking my head. I am a CPA and MBA in Finance, and I could not come close to understanding their business and how they made money long term. If I could not, I simply do not know how most other investors could either. I was not an analyst myself, but my friend was and I helped her draft a warning report on the firm at that time.

Every single meltdown did not come from out of the blue, regardless of what the media would have you believe. All of them had the same warning signs, like opacity of financial reports, that gave investors plenty of warning. The fact many investors choose to ignore such warnings and chase "hot stocks" is not our fault. The dot-com era was FILLED with warnings on these stocks being vastly ovrvalued, yet it didn't stop the legions of day traders and lemmings from chasing "hot markets".

Financial analysts cannot change human behavior, or to paraphrase Ron White, "we can't fix stupid".

 

OK so if there is now no issue with liquidity and no issue with deflation, then you contend the Fed can now reduce MB back to its traditional $500B amount?

 

Ben Bernanke doesn't call me to discuss his plans. From what he has said, my understanding is that the liquidity will be withdrawn when no longer required. I don't know that there is no liquidity problem anymore, and it is certainly obvious that the threat of deflation is still around.

 

I can understand why Bernanke doesn't have you on speed dial. You have directly contradicted yourself. The following is how the Federal Reserve works according to Cloud...

i.e. an increase in MB = a decrease in M and this causes deflation, Yet..... you then said:

i.e. an increase in MB = no effect on M and deflation and finally......

i.e. an increase in MB = an increase in M and this prevents deflation

:too-funny:
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So in the same topic, you state that when the Federal Reserve increases the Monetary Base, it causes deflation, it prevents deflation and it has no effect on anything. No further comment needed.

 

Not at all. In the first instance, I correctly indicated that the inflationary effect of creating a dollar to buy a bank asset is offset by the deflationary effect of the asset removal. And the inflationary effect of the government borrowing a dollar is offset by the deflationary effect of adding a dollar of debt to be serviced.
In the second, I indicated that MB has no impact on the other M’s such as MZM which excludes MB, which is also a correct statement.
In the third, I correctly stated that the Fed is adding liquidity to the banks to prevent deflation.
So you can remove context and try to change words and meanings, as you are wont to do, but everything is there for anyone to read and see your deception.

 

I agree with you in most respects but believe some accounting practices were partly responsible for the financial meltdown. Such as mark to market which flies in the face of the principle of conservatism in my opinion. The accounting for Credit Default Swaps of which establishing loss reserves were not required and etc.

 

This isn't what you said. You said that ANY increase in MB causes deflation. This conversation was about whether monetary inflation exists. If you are now explaining your way out of the above trap that you got yourself in by stating that it depends upon the purpose MB was increased then you have an even bigger issue. You just said yourself that Bernanke isn't calling you to let you in on his plans. So basically you just admitted that you have no idea.

Monetary Inflation does exist.
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(When I read your first statement where you stated that ANY increase in MB causes deflation, I knew you were going to get yourself caught in the trap that you did, because you don't understand the fundamental difference between a central banker balance sheet versus that of everyone else.)

 

Well, mark to market is fairly established, but so many items nowadays have "illiquid markets" and I would agree those should not be allowed in a mark to market calc.

I fully agree accounting can be improved on the edges, I was mainly responding to the traditional "Enron, Worldcom, dot-com, Madoff" argument about the failures of accounting. All of those areas had opaque financials, which many smart investors correctly pointed out. The major, recurring alarm bells were going off, yet people still refused to listen. Was AA to blame for not calling them out more? Yes, they were partly to blame, and as a result they are now defunct. However, following the simple "clarity" rule for investing will allow investors to sidestep these firms.

 

GREED, GREED, GREED!! Signs are every place, but many investors don't want or can't reads them. They believe what their newsletters or websites tell them

Jim

 

Please indicate a quote where I ever said that. Now we're into liar land.

 

Are you trying to say sir Jim Kramer, those folks who sell investment newsletters, as well as those who sell PM investment newsletters are not always right? Are you saying what the crowd is saying and ignoring market imbalances and gross pricing irregularities?

Say its not so!

Chris

 

Easy enough:

But the other side of the coin is that for every dollar they create, a dollar of asset is removed from the banking system or a dollar of debt is created, and both of those actions are deflationary​

Unless you are Bill Clinton, every means every. You were quite clear about it when it suited you at that time.