Money Money Money Money............................ Money

Loughton_Monkey

HAMISH_MCTAVISH wrote: »

So back to the money supply....

Which one?

• M0: In some countries, such as the United Kingdom, M0 includes bank reserves, so M0 is referred to as the monetary base, or narrow money.
• MB: is referred to as the monetary base or total currency. This is the base from which other forms of money (like checking deposits, listed below) are created and is traditionally the most liquid measure of the money supply.
• M1: Bank reserves are not included in M1.
• M2: Represents money and "close substitutes" for money. M2 is a broader classification of money than M1. Economists use M2 when looking to quantify the amount of money in circulation and trying to explain different economic monetary conditions. M2 is a key economic indicator used to forecast inflation.
• M3: M2 plus large and long-term deposits. Since 2006, M3 is no longer tracked by the US central bank. However, there are still estimates produced by various private institutions.
• MZM: Money with zero maturity. It measures the supply of financial assets redeemable at par on demand.

I'm not sure it's much to do with 'Money Supply' or the amount of debt [seemingly your original assertion]. All of these things are 'National' and to a large extent are merely the sum total of all individuals' [and companies'] personal actions.

Most of us here have some understanding (or at least interest) in the UK economics.... But when any one of the population (including us) makes a decision about buying a house, trading up our car, or paying £2 for that double expresso, we do it from the narrow perspective of our own 'wallet', coupled with our perception or confidence in our continued income/wealth.

We don't give a monkey's cuss about money supply, other than our own!

Bigdeflationfirst

Generali wrote: »

One of several problems is that the amount of debt in the economy is such that the cost of servicing it is weighing down on consumption.

The cost of servicing mortgages is low but the cost of servicing unsecured debt has hardly budged. In addition, real disposable incomes are falling which leaves less cash available to service the debt.

Of course if people are repaying debt then Fractional Reserve Banking money creation goes into reverse: for each £ that is repaid and not re-lent, somewhere between £10 and £20 is removed from the money supply as measured by M4.

That problem is exacerbated by the costs of implementing Basle III which effectively means that much debt that is being repaid cannot be re-lent by Government diktat. There are twin forces at work: banks can't lend and consumers can't borrow. That is a process that will take years or even decades to unwind.

The more I look at things the more I think that QE will never be unwound, even as interest rates rise.

Generali would you agree with the correct definition of inflation as an expansion of the currency supply and deflation as a contraction of the currency supply?

Do you think as my name suggests we are seeing big deflation first going by the correct definition of the word?

I can see all around the world central banks turning up the inflation (correct definition)to fight the deflation, with the Burnak heading the charge.

But with so much inflation pumped into the system, the energy build up when released could very easily lead to to big inflation or even hyperinflation.

Norfolk_Jim

The problem with wealth is that only things are true wealth. Money isn't wealth, it's an intangible. it only has value so long as society agrees to regard it as having a value. Once confidence in that starts to slide, money becomes what it effectively is, worthless. And today money is only figures on a screen, not even paper or metal. So wealth can only be what you own, not how much you have in the bank. Effectively theres nothing in the bank, no paper money, no coin, no precious metals nothing, it's just figures on a screen, 1,000,000 there you go have a million pounds - as long as people continue to attribute those figures on the screen with a belief that others will also believe in the system and participate in it in future.
And thats what scares me. The curent system is unsustainable and like every bubble will eventually burst leaving everyone in what state? I consider my pension is probably a waste and that savings are also a waste, its better to buy something with savings, unless you consider the current situation will continue indefinitely.
The same is true for those measures of value so often ramped here, gold and silver are pretty useless unless people agree to give it value. Take that away and its only value is as a material in something.

Bigdeflationfirst

Norfolk_Jim wrote: »

The problem with wealth is that only things are true wealth. Money isn't wealth, it's an intangible. it only has value so long as society agrees to regard it as having a value. Once confidence in that starts to slide, money becomes what it effectively is, worthless. And today money is only figures on a screen, not even paper or metal. So wealth can only be what you own, not how much you have in the bank. Effectively theres nothing in the bank, no paper money, no coin, no precious metals nothing, it's just figures on a screen, 1,000,000 there you go have a million pounds - as long as people continue to attribute those figures on the screen with a belief that others will also believe in the system and participate in it in future.
And thats what scares me. The curent system is unsustainable and like every bubble will eventually burst leaving everyone in what state? I consider my pension is probably a waste and that savings are also a waste, its better to buy something with savings, unless you consider the current situation will continue indefinitely.
The same is true for those measures of value so often ramped here, gold and silver are pretty useless unless people agree to give it value. Take that away and its only value is as a material in something.

Careful some folks dont like the truth being talked about on here, better keep head in the sand,

Thrugelmir

Bigdeflationfirst wrote: »

But with so much inflation pumped into the system, the energy build up when released could very easily lead to to big inflation or even hyperinflation.

Central Banks have the power of raising interest rates up their sleeve.

Markets themselves are normalising rates as the situation unwinds.

Bigdeflationfirst

Thrugelmir wrote: »

Central Banks have the power of raising interest rates up their sleeve.

Markets themselves are normalising rates as the situation unwinds.

True, but what situation is going to unwind?

Things can only get worse if interest rates have to go up to fight the inflation that has been caused by too much currency pumped into the world. This will make even less people borrow as the crisis worsens, and then they will need to inject even more trillions of units of currency into the supply.

All these trillions of units around the world are building up energy and when the masses realise just how the world is awash with so much currency, confidence can be lost in paper money no matter how high they put up interest rates.

Remember every single fiat currency has failed with 100% certainty, the path of the monetary system we have today is unsustainable so it will not be sustained.

Thrugelmir

Bigdeflationfirst wrote: »

True, but what situation is going to unwind?

The banks globally deleveraging.

Bigdeflationfirst

Thrugelmir wrote: »

The banks globally deleveraging.

So what? The banks remain under pressure from weak growth and the collapsing supply of outstanding revolving credit.

IMF wrote: »

The report said that severe stress in the euro area’s banking and government bond markets in late 2011 prompted banks to shrink their balance sheets. European banks have been under pressure to reduce leverage since 2008, and have accomplished this by selling assets, and raising capital while limiting their cuts in lending to companies and households.

http://www.imf.org/external/pubs/ft/survey/so/2012/NEW041812A.htm

Not exactly going to help the GFC, only seems to be adding fuel to the fire.

Thrugelmir, do you agree with the definitions of inflation and deflation that I said? And that prices change only as an effect of perceived inflation or deflation.

Thrugelmir

Bigdeflationfirst wrote: »

So what? So what? The banks remain under pressure from weak growth and the collapsing supply of outstanding revolving credit.

Banks have been restructuring and recapitalising since 2008. Progressively clearing their balance sheets of bad assets and improving margins. The work that Hester (for example) has achieved at RBS shouldn't be underestimated. May not make pretty reading from an investors point of view. But turning round a super tanker of a bank was never going to be straightforward as media suggests it would.

Until banks reach their nadir. Then the new dawn will remain on hold.

Thrugelmir

Bigdeflationfirst wrote: »

Thrugelmir, do you agree with the definitions of inflation and deflation that I said? And that prices change only as an effect of perceived inflation or deflation.

Yes in principle.

Though I believe we are witnessing a profound change globally. Where the West is no longer to dictate to the rest of the world.

This is going to have a far wider impact than our currently perceived woes.