Added Federal Reserve Board G19 Release on Consumer Credit (Current).
Tracking total consumer credit will give us some indication of how the overall economy is fairing. Credit destruction is a drag on GDP and deflationary.
Credit destruction is not deflationary. Let's say the money supply is $10 and I have $3. I lend one to you to buy something from someone else (who has the other $7) Before you make your purchase, I have 2, you have one, the other party has 7. When you make your purchase, I still have 2, you now have none, and the other person has 8. When you fail to produce something to sell to the other person to get a dollar to pay me back, how has the money supply changed? It is still the same $10 it was before. Credit destruction has deflationary effects, but is not in and of itself deflationary from a monetarist point of view. This is a lie told by banks to cover up the fact that they and the Fed caused the Great Depression by removing liquidity (which is real monetary deflation). There is a huge difference and the same ball is in play right now. We're seeing deflationary affects of credit destruction, but not monetary deflation.
Credit destruction is not deflationary. Let's say the money supply is $10 and I have $3. I lend one to you to buy something from someone else (who has the other $7) Before you make your purchase, I have 2, you have one, the other party has 7. When you make your purchase, I still have 2, you now have none, and the other person has 8. When you fail to produce something to sell to the other person to get a dollar to pay me back, how has the money supply changed? It is still the same $10 it was before. Credit destruction has deflationary effects, but is not in and of itself deflationary from a monetarist point of view. This is a lie told by banks to cover up the fact that they and the Fed caused the Great Depression by removing liquidity (which is real monetary deflation). There is a huge difference and the same ball is in play right now. We're seeing deflationary affects of credit destruction, but not monetary deflation.
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