35 replies to this topic

[James Quillian]

[quote][James,

I'm not seeing the same statistics you are. Perhaps you can explain. I see the 90 billion increase in M1 as reported by the Fed for the two weeks ended 9/29/08. But I also see that government borrowing increased by some 262 billion over that same period, as reported at http://www.treasuryd...ov/NP/NPGateway

That implies a net reduction in private lending of some 170 billion. What am I missing?
/quote]

When the FOMC decides to increase the money supply it orders the trading desk at the Federal Reserve Bank of New York to Purchase government securities in the open market. At that point government debt is increased. The dealer firm who sells the securities deposits the money in its bank. Government debt is increased and M1 is increased by the same amount. Government has borrowed by the amount that M1 has increased. When government borrows it doesn't tranlate into a reduction inprivate debt.

Because of fractional reserves the initial deposit multiplies though the banking system.

There is now way for private debt to fall while M1 is rising.

[bullshort]

The dealer firm who sells the securities deposits the money in its bank. Government debt is increased and M1 is increased by the same amount. Government has borrowed by the amount that M1 has increased.

So . . . everything else being equal, since government debt increased by 262 billion we would expect to see M1 increase by 262 billion, right? However, M1 only increased by 90 billion. Ergo, there must have been a contraction in private lending by 172 billion.

[OEXCHAOS]

There is a psychological effect of overspending during inflation because it
costs more tomorrow, if that is continuing it is a remnant of a 6 year habit.
It's a deflation now, which follows an inflation, but they dont know it yet.

It's funny, but I was down to about 1/3 tank and as I was driving up on the station, I saw that they were offering regular at 3.03, down from a much improved 3.34 a day before. I wondered how long I could wait to fill up and how much I could save.

THAT'S a deflationary mentality.

Mark

[OEXCHAOS]

I can't explain why M1 shows what it does. But I find it amusing James that you actually believe the government numbers after some of your prior postings.

I don't think that M1 can be faked. If the Fed is lying about M1 then I'm not sure about anything. It certainly isn't a phantom number.
M1 cannot increase unless credit is expanding. Maybe it is the non anointed who are getting money but credit is still expanding.

The only arguments that I have seen that there actually is a credit crisis are based on what is called the fallacy of composition.
That is, pointing to a few occurances of something happening and concluding that what was observed is happening everywhere. Its like finding poor old Joe who has lost his mortgage crying and assuming that everyone is losing his mortgage.
There is just no evidence being offered that money is not being lent. I have been waiting for months to see some evidence. I don't think our lawmakers saw any either. There isn't any evidence.
This is a simple case of passing losses.

James,

When I was applying for a refi, they were all over me with more money than I needed at a pretty good rate. Then, when we got to the final commitment, the number dropped 10% suddenly and the rate bumped up. It wasn't a lot of money and I didn't care, but that was some tightening, I'd say.

On the other hand, I've been opening several lines of credit and picking up a couple credit cards over the past 6 months to fund a project and there was AMPLE and ready unsecured credit at 0%-2% for 6-12 months available to me. I mean a ton of money. And more being offered...

Don't know that that means, but I'm glad it's not as bad in this sector as folks are saying it is elsewhere.

Mark

[ed rader]

I can't explain why M1 shows what it does. But I find it amusing James that you actually believe the government numbers after some of your prior postings.

I don't think that M1 can be faked. If the Fed is lying about M1 then I'm not sure about anything. It certainly isn't a phantom number.
M1 cannot increase unless credit is expanding. Maybe it is the non anointed who are getting money but credit is still expanding.

The only arguments that I have seen that there actually is a credit crisis are based on what is called the fallacy of composition.
That is, pointing to a few occurances of something happening and concluding that what was observed is happening everywhere. Its like finding poor old Joe who has lost his mortgage crying and assuming that everyone is losing his mortgage.
There is just no evidence being offered that money is not being lent. I have been waiting for months to see some evidence. I don't think our lawmakers saw any either. There isn't any evidence.
This is a simple case of passing losses.

James,

When I was applying for a refi, they were all over me with more money than I needed at a pretty good rate. Then, when we got to the final commitment, the number dropped 10% suddenly and the rate bumped up. It wasn't a lot of money and I didn't care, but that was some tightening, I'd say.

On the other hand, I've been opening several lines of credit and picking up a couple credit cards over the past 6 months to fund a project and there was AMPLE and ready unsecured credit at 0%-2% for 6-12 months available to me. I mean a ton of money. And more being offered...

Don't know that that means, but I'm glad it's not as bad in this sector as folks are saying it is elsewhere.

Mark

Mark -- when i read your posts on "everyday" economics i always get the impression that mayberry may just be a little behind silicon valley .

ed rader

[OEXCHAOS]

I can't explain why M1 shows what it does. But I find it amusing James that you actually believe the government numbers after some of your prior postings.

I don't think that M1 can be faked. If the Fed is lying about M1 then I'm not sure about anything. It certainly isn't a phantom number.
M1 cannot increase unless credit is expanding. Maybe it is the non anointed who are getting money but credit is still expanding.

The only arguments that I have seen that there actually is a credit crisis are based on what is called the fallacy of composition.
That is, pointing to a few occurances of something happening and concluding that what was observed is happening everywhere. Its like finding poor old Joe who has lost his mortgage crying and assuming that everyone is losing his mortgage.
There is just no evidence being offered that money is not being lent. I have been waiting for months to see some evidence. I don't think our lawmakers saw any either. There isn't any evidence.
This is a simple case of passing losses.

James,

When I was applying for a refi, they were all over me with more money than I needed at a pretty good rate. Then, when we got to the final commitment, the number dropped 10% suddenly and the rate bumped up. It wasn't a lot of money and I didn't care, but that was some tightening, I'd say.

On the other hand, I've been opening several lines of credit and picking up a couple credit cards over the past 6 months to fund a project and there was AMPLE and ready unsecured credit at 0%-2% for 6-12 months available to me. I mean a ton of money. And more being offered...

Don't know that that means, but I'm glad it's not as bad in this sector as folks are saying it is elsewhere.

Mark

Mark -- when i read your posts on "everyday" economics i always get the impression that mayberry may just be a little behind silicon valley .

ed rader

When the world ends, move here to buy yourself an extra 10 years.

Seriously, though, out here, we're not industrially focused, and we have a relatively conservative mentality. As such, most real estate didn't get out of line and neither did borrowing or leverage. You can live pretty inexpensively out here and still get the finer things in life. Also, you can get to the international airport (a hub) and be in Paris in just a few hours.

But the bottom line here is that we run more slowly and steadily here and we take smaller risks. Innovation is NOT synonymous with the Ohio Valley.