This bothers me about Obama....

dstark
Mon, 31 Mar 2008 19:58:24 +0000

[Insider ratings have eroded trust in Wall Street - The Boston Globe](http://www.boston.com/business/articles/2008/03/30/insider_ratings_have_eroded_trust_in_wall_street/)

The monetary base doesn’t measure debt creation. It’s too small a measure.

"The monetary base, however, is only one of two determinants of the M1 money supply - the amount of currency plus checking account balances - that governs our liquidity and the level of prices.

The other determinant is bank lending. If banks stop lending, there will be less money deposited in checking accounts. That means less money to be re-lent, deposited, etc., via what’s called the money multiplier. Without this lending, M1 can contract and prices fall.

This is what happened in the '30s. The Fed expanded the monetary base by one-fifth, but the banks stopped lending. So the money multiplier fell. On balance M1 contracted and prices started falling. The same thing happened in Japan in the 1990s."

[The Telegraph - Calcutta (Kolkata) | Opinion | A fall worse than the Great Depression](Telegraph India | Latest News, Top Stories, Opinion, News Analysis and Comments)

Nobody knows how the financial situation in the US right now will play out.

Nobody.