Credit Hyperinflation & Deflation

John, forgive the ignorance but what do you exaclty with the term "credit deflation"?
Shouldn´t be the other way around (inflation)? due to the QE of the FED?
Thanks

Please know I use the tactic of taking a definite opinion on any topic which interests, especially with a view to provoke contradiction.  My thesis invites antithesis, from which I may form syntheses, and ever go deeper into topics.

I am dead wrong about credit deflation.  I fused Mish Shedlock's victory in a debate among Austrian economics over hyperinflation, especially with Dr. Gary North, with Shedlock's other unique contribution that the role of credit in the markets (properly defined) was the reason that we had not had hyperinflation in currency, plus Dr. Frank Shostak's  (and others) delineation of "good credit" and "bad credit."

My thesis was initially we are in credit deflation.  Implicit in your question is the awareness "credit deflation" is incoherent in these circumstances.  You are right.  Now my thesis is we are experiencing credit hyperinflation.

What do we have?  In the asset category of bad credit, we have hyperinflation.  They created so much of it, it is absolutely worthless, except in wiped out categories: equities, education, health care and housing.  Look at the trillions in fake stock values, another trillion is pointless student loan (and non-bankruptable) student loan debt, billions in auto loan debt which cannot be repaid, ever more overcharging for risible health care, and of course the ridiculous price of houses, ginned up by the extension of bad credit.  This is a large part of the economy, and debt for which there are claims, but will never be paid.  Expect fights, but know all the assets listed will go for pennies on the dollar very soon.

There is good credit, asset backed, at no interest, which is in such small amounts in each instance that it is incalculable.  This will actually rise in value.  This will also grow at teh small business level.

Hyperinflation is a monetary event in which when they print too much currency, you have too many dollars chasing a static amount of goods.  Prices appear to rise, but the effect is theft from the last people to get the new currency.

Hyperinflation in credit is a monetary event in which when they extend too much credit, you have too much credit chasing a static amount of goods.  Prices appear to rise, but the effect is theft from the last people to get the new credit.

GE knows this game is over and got rid of its "bad credit" machine.  There will be a categorical crash in this part of the economy.

They did not print too much currency.  That is still good.  The proof is they are trying to call it in (when you deposit your money in the bank, your money is owned by the bank, not you... that is the law) force you to use, if not bad credit, debit cards and they have begun outlawing storing cash in safety deposit boxes.  

Before 1913, any bank would issue its own currency, and after 1913 that is still the legal fiction, but by law you must only use the Federal Reserve Notes.  Deregulating banking would cure our economic ills, but wipe out all of the bad economy.  That would take out the powers that be, and the military would have to return to a defensive force.  Ain't gonna happen.

So now that the powers that be have run out of "policy options", that is they can neither do any good nor bad, they are now just rent collectors, who can put people in jail.

Asset-less credit extension is neither necessary nor sufficient in the part of the economy that is productive, and creating economic value in the productive part of the will be a matter of discipline.  Vast swathes of America and Americans cannot be your customers because they are willfully unproductive.  Entitlement on the part of the rich and poor will cause them to fight over the rents from that very thin film of productive assets to which astronomical claims are attached.

On the other hand, it is easy to spot your customers, by their patterns and practices in economic activity, one crucial aspect is do they extend credit against assets in their business dealings?  (And by implication, check the creditworthiness of their customers, meaning the personally grant and refuse credit.)

Credit is important, what kind of credit is important, how it is employed is important, far more than money.  if there is one skill that now needs to be learned, it is this.  Although this skill was becoming useless when I first started, I am glad I learned it, because demand for this skill is roaring back.

The world changed the last three months.


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