Some great posts around the web today. Of course, what my definition of a great post may well vary from yours, but I favour the non-hysterical, non-histrionic discussion of market-related issues.
There is hardly any point in me repeating what has been said in these sensible posts, but I will, and also link to them. Somewhere I read that b/s travels at the speed of sound, but truth takes much longer. By discussing and linking to these two articles, hopefully the process of truth discovery can be accelerated …
This from James Hamilton at Econbrowser on the chorus of doomsayers still foaming-at-the-mouth about ‘money printing’ and hyperinflation:
Money and reserves http://www.econbrowser.com/archives/2011/02/money_and_reser.html
Let me try to summarise this post, although it is really worthwhile reading the whole thing:
I wanted to offer some clarification on stories about all the money that the Federal Reserve is supposedly printing. It depends, I guess, on your definition of “money.” And your definition of “printing.” …
Currency in circulation has increased by 5.2% per year over the last two years, a bit below the average for the last decade…
the Fed simply credited the accounts that banks that are members of the Federal Reserve System hold with the Fed. These electronic credits, or reserve balances, are what has exploded since 2008. …
Now, the Fed is going to want to reduce these reserve balances as the economy picks up:
Doing this obviously involves some potentially tricky details … the volumes involved and lack of experience with this situation suggest great caution is called for in timing and operational details. Sober observers can and do worry about how well the Fed will be able to pull this off.
But that worry is very different from the popular impression by some that hyperinflation is just around the corner as a necessary consequence of all the money that the Fed has supposedly printed.
This from Jeff Miller at A Dash of Insight (a blog that defies its name, it actually serves out insight in huge great portions):
Everything You Need to Know about Inflation
I can’t help but quote some of Jeff Miller’s comments:
The sellers of fear, gold, structured products, and page views are still setting the agenda. Leading the charge is Paul Farrell who calls Fed Chair Bernanke “the most dangerous human on earth.” This is pretty bold talk from someone who has scared a million or more investors into missing the rebound in stocks. He reaches so many people that on a reader-weighted basis, his “free” advice is the most expensive on the Internet. But fear sells, so his Bernanke-bashing gets top ratings in popularity.
Amen to that. Any trader or investor who wants to survive and prosper in this game needs to take heed of articles like these from Hamilton and Miller. It is not often easy finding good sources, and knowing enough to reject the agenda-driven rantings of others; writers like Hamilton and Miller are to be treasured.