http://www.minyanville.com/articles/economy-fed-fdic/index/a/24261
Van Hoisington and Lacy Hunt have figured out what few others have; namely, that excessive debt and falling asset prices have conspired to render the best efforts of the Federal Reserve impotent.
Please consider the Hoisington Second Quarter 2009 Outlook.
“One of the more common beliefs about the operation of the US economy is that a massive increase in the Fed’s balance sheet will automatically lead to a quick and substantial rise in inflation. [However] An inflationary surge of this type must work either through the banking system or through non-bank institutions that act like banks which are often called 'shadow banks.' The process toward inflation in both cases is a necessary increasing cycle of borrowing and lending. As of today, that private market mechanism has been acting as a brake on the normal functioning of the monetary engine.
Foreclosures and delinquencies on mortgages are continuing to rise, indicating that the banks and their non-bank competitors face additional pressures to re-trench, not expand. Thus far in this unusual business cycle, excessive debt and falling asset prices have conspired to render the best efforts of the Fed impotent.”
With that, we can safely add Hoisington to the small group of people who understand that Belief In Wizards Is Misguided. Continuing with a discussion from Hoisington:
The Complex Monetary Chain
