this is a test. 

-=> GRANT WEASNER wrote to WWW.FREEDOMTOFASCISM.COM <=-

 -=> WWW.FREEDOMTOFASCISM.COM wrote to ALT.ALIEN.VISITORS,ALT.CU <=-
 GW> Ha haa! You posted allot of the same message. Did you mean to do that?
 WW> To: alt.alien.visitors,alt.current-even
 WW> Subject: Re: Dark & Stormy Waters:  Uh Oh....  Monetary Flat Spin


 WW> "www.freedomtofascism.com" 
wrote in message
 WW> news:496238f3$2$22634$7836cce5{at}newsrazor.net...
 >
 > "www.freedomtofascism.com"  wrote
in message
 > news:4962387b$0$22671$7836cce5{at}newsrazor.net...
 >>
 >> "www.freedomtofascism.com"  wrote in message
 >> news:7uu3m4tqh9gq8tn0bbu5o5rer634ibasfu{at}4ax.com...
 >>> Uh Oh....  Monetary Flat Spin
 >>>
 WW> http://market-ticker.denninger.net/archives/703-Uh-Oh.....-Monetary-Flat
 WW> -Spin.html
 >>>
 >>> M1 money multiplier
 >>> http://market-ticker.org/uploads/MULT_Max_630_378.png
 >>>
 >>> That has gone "just below" 1.0.
 >>>
 >>> What is this?
 >>>
 >>> I could go through the derivation of how money supply works in a
 >>> fractional
 >>> reserve monetary system (any), but won't, because most readers would
 >>> have
 >>> their eyes glaze over.
 >>>
 >>> The important part of this graph is what it denotes.  Bernanke has lost
 >>> control of "N" (or velocity), which is the actual
knob that he is trying
 >>> to
 >>> diddle when borrowing rates are changed (and in fact its the
market that
 >>> sets that, despite his protests.)
 >>>
 >>> In fact the most useful tool in The Fed's box in terms of influencing
 >>> monetary policy is the soapbox, that is, jawboning (whether it be by
 >>> cajoling or threatening.)
 >>>
 >>> The problem with an M1 multiplier below one is that the effect of
 >>> printing
 >>> money is of course multiplied by the velocity.  That is, if
you print up
 >>> $10
 >>> into the economy the impact it has on economic activity depends on how
 >>> many
 >>> times that $10 circulates in a given amount of time.  The more it
 >>> circulates
 >>> the higher the impact and the more your efforts do for the economy.
 >>>
 >>> The bad news is that when the multiplier is less than one the
more money
 >>> you
 >>> spew into the economy the worse the impact, as you get less for each
 >>> additional dollar.
 >>>
 >>> If you remember the "GDP for each dollar of debt" graph....
 >>> http://market-ticker.org/uploads/debt-contribution.serendipityThumb.jpg
 >>>
 >>> M1's multiplier going below 1 strongly implies (but does not yet prove)
 >>> that
 >>> we have reached that "zero hour".
 >>>
 >>> Why?  Because all money is in fact debt; this is inherent in all modern
 >>> monetary systems.
 >>>
 >>> When Bernanke "creates" money he is doing so
against an asset - that is,
 >>> he
 >>> is issuing debt.  A Federal Reserve Note (whether electronic or paper)
 >>> is in
 >>> fact effectively a bond of zero maturity and indefinite expiration
 >>> against
 >>> the future tax collection capacity of The United States.
 >>>
 >>> That is, it's a treasury bond (via a circuitous route)
 >>>
 >>> The paradox that Bernanke is in danger of discovering (the hard way) is
 >>> the
 >>> paradox of a pilot who finds himself in a flat spin.  As the ground
 >>> approaches he wants to pull back on the stick but if he does so, the
 >>> spin
 >>> simply tightens as the wings are not producing lift - the angle of
 >>> attack is
 >>> too high, not too low.  As such if he does what his brain
screams at him
 >>> to
 >>> do instinctively, he dies.
 >>>
 >>> Or the scuba diver who sucks on the reg and gets nothing. 
Your instinct
 >>> is
 >>> to hold your breath and kick for the surface.  If you do it you die.
 >>>
 >>> In both cases your only hope of survival is to do exactly the opposite
 >>> of
 >>> your instinct.  In the case of the pilot you must not only give
 >>> counter-rudder (to stop the rotation) but also push the stick forward.
 >>> In
 >>> the case of the diver you must exhale that last breath you have in your
 >>> lungs, knowing there are no more in the tank while you kick to ascend.
 >>>
 >>> If you succumb to instinct you are dead.  Really dead, as in splat (or
 >>> exploded lungs.)
 >>>
 >>> Bernanke is effectively in the same box.  The foundation of his entire
 >>> thesis as a banker is that a central bank can always reverse
a deflation
 >>> by
 >>> printing money.  Unfortunately as he has done so velocity has
fallen and
 >>> the
 >>> multiplier has now gone below 1.  If this induces him to do
even more of
 >>> what caused this decrease there is a very real risk that the actual
 >>> market
 >>> reaction will be to tighten the monetary flat spin.
 >>>
 >>> This is because the underlying problem in the economy isn't the lack of
 >>> debt
 >>> (money) in the system.  It is that there is too much debt of all sorts,
 >>> and
 >>> since money is in fact a form of debt, you can't fix the problem by
 >>> playing
 >>> helicopter drop!
 >>>
 >>> As I have said for more than a year the only way out is to
force the bad
 >>> debt out into the open and default it.  Yes, this will produce
 >>> bankruptcies
 >>> - lots of them, including some for "inconvenient"
people like Paulson's
 >>> buddies on Wall Street.
 >>>
 >>> But until and unless that happens adding more debt to the system
 >>> depresses
 >>> the multiplier effect of that debt on circulation further, and harms,
 >>> rather
 >>> than helps the situation.
 >>>
 >>> I don't expect our government officials to understand the math on this,
 >>> nor
 >>> would trying to go through it help 99% of the readers, but
 >>> unfortunately,
 >>> mathematics is the only true science - and you can't twist
it, no matter
 >>> how
 >>> hard you try.
 >>>
 >>> Bernanke knows this at an intellectual level, just as the diver - or
 >>> pilot -
 >>> knows that if he holds his breath (or pulls the stick) he is going to
 >>> die.
 >>>
 >>> The question now becomes whether Bernanke can overcome not
only instinct
 >>> but
 >>> also political pressure to do the wrong thing and instead use his
 >>> intellect
 >>> - and the math - to do the right thing.
 >>>
 >>> What is the right thing?  Paradoxially, it is to withdraw liquidity and
 >>> by
 >>> doing so force the bad debt into the open where it does (and must)
 >>> default.
 >>>
 >>> How far can the above ratio contract before we cross an
"event horizon"
 >>> from
 >>> which there is no escape?
 >>>
 >>> I don't know.
 >>>
 >>> But I do know that there is a "too late" point, as
there is for all such
 >>> things, and that we are approaching it, as I have been saying for
 >>> months.
 >>>
 >>> BTW, evidence that Bernanke's Monetary Flat Spin is already impacting
 >>> the
 >>> economy in ways that may do critical (if not fatal) damage was found
 >>> this
 >>> morning in the Case-Schiller numbers.  Everyone, including
Bernanke, was
 >>> expecting the rate of home price declines to start to slow in
the second
 >>> half of the year.  Instead, they accelerated.
 >>>
 >>> We're in uncharted territory folks, and the forecast is for
 >>> dark-and-stinky
 >>> storms.
 >>>
 >>> Buckle up.
 >>>
 >>> PS: Congress, and the rest of America, can't say they weren't warned.
 >>> They
 >>> were - right here:
 >>>
 >>>
 WW> http://market-ticker.denninger.net/archives/618-Congress-What-Bernanke-a
 WW> nd-Hank-Arent-Telling-You.html
 >>>
 >>>
 >>>
 >>>
 >>>
 >>> This post originated from Supernews,
 >>> not newsrazor.net. The idiot posting
 >>> from newsrazor.net is forging the nym
 >>> www.freedomtofascism.com in hopes that
 >>> people reading Google will think we're
 >>> the same person.
 >>
 >>
 >
 >
 WW> --- SBBSecho 2.12-Win32

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 GW> 42?!"

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