I started to stick this in one of the other threads but it's a long read and worthy of it's own thread.

http://globaleconomicanalysis.blogspot.com/2009/02/fiat-world-mathematical-model.html

For those of you that are free marketers to the core, you'll identify with Mish. His stance for awhile now is a modest amount of deflation is fine, let the banks that have failed go broke, and let's move on with our lives. He has a pretty large following and I have yet to see any other fairly popular blogger challenge him on ANYTHING.

2/19/2009 10:47:59 AM

darnit.

i thought this was going to be about the Flat-Earth Conspiracy Theorists.

2/19/2009 1:13:50 PM

the chart he has with the penant formation preceding base money supply increases that preceded WWII is insightful -- the more you print, the more valuable "stuff" becomes, and the more likely you are to take arms to secure sources of "stuff".

IMHO the lesson to be learned is that of, making means of production/unearthing of "stuff" world class. the better a country is at making stuff, the better off it is. the anti-argument is that of banana republics and the value of any countries currency (aka balance sheet) being too closely tied to the swings of one or a few commodities. if you rely too much on acquiring "stuff", sooner or later you'll be making tanks and bombs and sacrificing young people in order to keep acquiring "stuff".

one view is that one thing leads the other (money supply vs. stuff). another view is that its more of a symbiotic relationship. i think Chimerica will achieve that balance of money & "stuff" sooner rather than later, and it can be done peacefully.

2/19/2009 1:27:37 PM