The money supply continues to fall, but investors don’t seem to care. They are convinced that their success is connected to a potential Fed shift in interest rate policy. Nothing else seems to matter. That is partially attributable to the fact that, as the financial markets continue their upward trajectory, less and less attention is paid to the deteriorating economy. And, the deterioration is getting worse.
bank failures
System Liquidity Risk – Cash Is Preferred & Appreciated
SYSTEM LIQUIDITY IS THE BIGGER RISK – “CASH IS PREFERRED AND APPRECIATED”
There is quite a bit of debate right now about whether inflation’s effects will worsen again soon; or, whether the inflation threat has been minimized and “disinflation” will prevail. Don’t look now, but the specter of a liquidity crisis is looming in the background.
The situation is such that a liquidity crisis of epic proportion might overtake all of us in our arguments about the quantity and extent of inflation’s effects. My concern was heightened this past weekend when I drove to a small, local restaurant to pick up a take-out order.