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Image | Disappearing Money & The Great ‘Flation Debate
Disappearing Money & The Great ‘Flation Debate
 PREVIEW
by Chris Martenson
Saturday, August 30, 2008

Here are two recent reader emails and my responses to them. The first asks the question, “Why does money have to disappear when debts get paid down?” and the second asks why I favor an inflationary outcome over a deflationary outcome. Since I think each of these reflects a possible source of broad interest, I decided to give them full responses and turned them into this weekend’s report.

Disappearing Money & The Great ‘Flation Debate
 PREVIEW by Chris Martenson
Saturday, August 30, 2008

Here are two recent reader emails and my responses to them. The first asks the question, “Why does money have to disappear when debts get paid down?” and the second asks why I favor an inflationary outcome over a deflationary outcome. Since I think each of these reflects a possible source of broad interest, I decided to give them full responses and turned them into this weekend’s report.

Image | GM cuts off their nose
GM cuts off their nose
by Chris Martenson
If I were to be
exceptionally sarcastic here, I would note that it is lucky for GM and
its dealers that there was 3.3% GDP growth last quarter. If I were to
shrug off the GDP report as hopelessly inaccurate, I would observe that
when an auto manufacturer cuts off a $2.1 billion dollar (annually!)
distributor of its products over concerns about the financial health of
that entity, then there is a deep recession underway.
GM cuts off their nose
 by Chris Martenson
If I were to be
exceptionally sarcastic here, I would note that it is lucky for GM and
its dealers that there was 3.3% GDP growth last quarter. If I were to
shrug off the GDP report as hopelessly inaccurate, I would observe that
when an auto manufacturer cuts off a $2.1 billion dollar (annually!)
distributor of its products over concerns about the financial health of
that entity, then there is a deep recession underway.
Image | Prime foreclosures surge
Prime foreclosures surge
by Chris Martenson
Wow, with three
exclamation points. The fact that PRIME foreclosures have now moved
past SUBPRIME foreclosures is a big deal. In case you don’t know, the
Hope Now program is a government-sponsored affair that was initiated
very early on in the housing/credit bust. Its intent was to help
borrowers avoid foreclosure by renegotiating the terms of their
deal(s).
Prime foreclosures surge
 by Chris Martenson
Wow, with three
exclamation points. The fact that PRIME foreclosures have now moved
past SUBPRIME foreclosures is a big deal. In case you don’t know, the
Hope Now program is a government-sponsored affair that was initiated
very early on in the housing/credit bust. Its intent was to help
borrowers avoid foreclosure by renegotiating the terms of their
deal(s).
Image | Fuzzier than ever – GDP reported to be 3.3%
Fuzzier than ever – GDP reported to be 3.3%
by Chris Martenson
A
truly laughably fraudulent GDP report was released by the government
today.  However, we’re getting close to this just being a sad parody of
Soviet crop reports of old, which were famous for being utterly out of
alignment with reality.
Fuzzier than ever – GDP reported to be 3.3%
 by Chris Martenson
A
truly laughably fraudulent GDP report was released by the government
today.  However, we’re getting close to this just being a sad parody of
Soviet crop reports of old, which were famous for being utterly out of
alignment with reality.
Image | Record bank debt coming due
Record bank debt coming due
by Chris Martenson

And here’s
the data I’ve been waiting for. To the exhaustive pile of new borrowing
that the US government needs to shoulder, we can add $871 billion of
debt that financial firms will need to somehow fund at the exact same
time. I will be more than a little surprised if this does not result in
either drastically higher interest rates, or massive inflation.
Record bank debt coming due
 by Chris Martenson

And here’s
the data I’ve been waiting for. To the exhaustive pile of new borrowing
that the US government needs to shoulder, we can add $871 billion of
debt that financial firms will need to somehow fund at the exact same
time. I will be more than a little surprised if this does not result in
either drastically higher interest rates, or massive inflation.
Image | Problem banks expand 30%
Problem banks expand 30%
by Chris Martenson

It’s worth
noting that not every bank on the problem list will fail, and not every
failure will be on the list. To my knowledge, IndyMac was not on the
list prior to failing. But the trend here tells us something
meaningful; a 30% increase in problem banks in one quarter says we’re
still in the early stages of this credit crisis.
Problem banks expand 30%
 by Chris Martenson

It’s worth
noting that not every bank on the problem list will fail, and not every
failure will be on the list. To my knowledge, IndyMac was not on the
list prior to failing. But the trend here tells us something
meaningful; a 30% increase in problem banks in one quarter says we’re
still in the early stages of this credit crisis.
Image | Home prices drop
Home prices drop
by Chris Martenson
We’ve had
damaging housing busts in the past, but they’ve always been contained
to a specific region. Houston in the 1980’s and Florida in the 1920’s
taught us that even a localized housing bust could spread ripples of
discomfort far beyond their borders. This data showing that NO cities
in the index saw a price gain deserves some notice.
Home prices drop
 by Chris Martenson
We’ve had
damaging housing busts in the past, but they’ve always been contained
to a specific region. Houston in the 1980’s and Florida in the 1920’s
taught us that even a localized housing bust could spread ripples of
discomfort far beyond their borders. This data showing that NO cities
in the index saw a price gain deserves some notice.
Total 4911 items
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