Saturday, June 20, 2009

Mike Shedlock and Martin Weiss show evidence of Deflation

A very good article on the size deflating credit and a strong answer to the inflationist fear of imminent inflation. I do not know Mike Shedlock though I have read his blog for quite a while and he has been very good. I do know Martin Weiss for over 30 years and his work is exemplary and thorough. So I commend this article wholeheartedly.

Flow of Funds Report Offers Hard Evidence of Deflation

It’s all in the Fed’s Flow of Funds Report for the first quarter of 2009, which I’ve posted on our website with the key numbers in a red box for all those who would like to see the evidence.

First and foremost, the Fed’s numbers demonstrate, beyond a shadow of a doubt, that the credit market meltdown, which struck with full force after the Lehman Brothers failure last September, actually got a lot worse in the first quarter of this year.

The treasury and the Fed are trying to reflate as fast as possible and that is the correct approach if one has the stomach to pull that money back when positive results are achieved. Unfortunately the Pelosi crafted stimulus bill does not focus on productive infrastructure rebuilding of the electrical grid, bridge and highway repair, or repair and update of the rapidly aging water and sewer systems of our major cities. All of those projects are huge and necessary and would create jobs that will payoff for the economy over long time periods. Instead they are using the money to payoff political supporters and buy votes from the least productive portions of our society.

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