Friday, May 25, 2012

I need to elaborate.

At the end of the second paragraph in the last post I concluded,
But with the monetizing of JPM liabilities, and all that euro trash, I hardly see concern for deflation at the operational level.
 My thoughts are as follows:
  • The "derivative" industry sometimes called shadow banking is a parallel universe of leverage and risk.  In theory, the principal behind the risk should not be monetized - it is the leverage that produces the return by collecting premium.
  • By defaulting Greece in CDS while also bailing out Greece and other nations with the LTRO, both parties win and are winning.  This is the same with bailing out Goldman, et al through AIG nationalization.
  • The IMF ( has agreed to back the ECB, who has agreed to fund the LTRO and Greece, who has agreed to fund it's insolvent banks through the Bank of Greece.
  • In these examples money has entered the system in a way that should be more binary.  Zerohedge does enough with M2, but suffice to conclude that the problem is that a capitalist economy is predicated on "there is no such thing as a free lunch."  No longer the case.
  • Any government dispensing money, whether through corporate subsidy (Solyndra), bailout (GM), or social engineering (food stamps) is decidedly ham-fisted.  As such, the markets for inputs become less competitive as the governments have no theoretical competitive limitation while brandishing the keys to a printing-press.  Therefore, the price of labor but especially food becomes more expensive.