For much of the last decade, the real monetisation has occurred offshore, which has, in turn, allowed the Fed to look virtuous. As noted in Yves’ post “US-China Co-Dependent Behaviour Worsens”, there’s little reason to rely on the indefinite continuance of this “happy” pattern (it’s nothing of the sort, of course, viewed from a slightly larger perspective).

The combination of the heavy lifting being done elsewhere and the market’s continuing (albeit finally diminishing) faith in the Fed has meant they could get by on largely symbolic acts. The point will come (and probably soon) where this is no longer so, when the Fed, and the markets, will have to face up to a much less palatable mix than the one they’re grumbling about now.

The idea that any paper currency is in danger of appreciating systemically because of excessive debt must be too alluring a concept to overcome overwhelming evidence to the contrary.

Paper currencies don’t die off because they are appreciating too much, they die off because after repeated abuse with over issuance and neglect nobody wants or trusts them anymore.

Formerly shaky governments around the world are accumulating excessive dollar reserves at more rapid rates. Unfortunately, the wet dream of deflation is just that.

It’s real easy to do.

In the comment box, just click on the radio button that identified as “Name/URL”. Then type in your chosen name in the Name field. That’s all that you have to do.

The dollar itself is an instrument of credit as all fiat is. Issue to much credit and the wheels come off the factional reserve banking wagon.

Just because debt is being warehoused doesn’t mean it won’t come due.

It’s pretty obvious there is not enough fiat to service the debt. Inflation will be in demand to cover.

Getting caught up in pet theories and trying to force events to your framework is no way to analyze anything.

Gary North calls these people “deflationists in the second generation” – despite decades of substantial inflation, they still cling to Treasuries.

Mish at globaleconomic says:

“Claims that those charts (M3) show hyperinflation, or even a rampant increase in money supply is typical of the half-baked analysis spawning all over the web. For starters MZM and M3 contain credit transactions and money equivalents, not money.

And the distinction between money and credit is a crucial issue. A rapid increase in money supply leads to a Weimar Republic or Zimbabwe hyperinflationary scenario, while a rapid increase in credit eventually leads to a Great Depression or Tulip Bubble collapse endgame.”

The ST Louis Fed’s own Base Money chart shows y/y growth close to zero.

I think its an important distinction. Mish makes a very strong case we are in a deflationary period, not inflationary, because credit (money) is being destroyed at a record pace.

http://globaleconomicanalysis.blogspot.com/2008/04/mzm-m3-show-flight-to-safety.html

Either the Fed is seriously goosing the money supply or the Fed has completely lost control of the money supply.

I suspect the latter, which might explain why the Fed stopped reporting M3 just as Greenspan waltzed out the door. When in doubt hide the evidence, standard MO in Washington.

A Different Anonymous

I bet Bernanke is quite surprised that his helicopter theory does not work as he envisioned. He thought that by magic the freshly printed Bernankes will pour back in the real estate, but for some reason they all went to euros, oil, grains, flour, metals, etc.