Luft Waffle

Ninety nine red balloons
Floating in the summer sky
Panic bells, it's red alert
There's something here from somewhere else
--Nena

Many claim that recent Fed interventions are undoubtedly hyperinflationary, and point to ongoing double digit annual percentage increases in broad measures of money supply as proof positive. However, these monetary aggregates don't include many derivatives (notionally valued in the hundreds of $trillions). Moreover, they don't include credit instruments on bank balance sheets that have yet to be marked to market.

Although the aggregate metrics don't account for it, many of these esoteric assets have declined dramatically in value over the past 12 months. Should the Citigroups (C), JP Morgans (JPM), et al of the world stumble into a forced selling stampede, then the magnitude of the deflation will become more apparent.

Essentially, credit and debt are being destroyed. Given the sheer size of the systemic leverage, it seems increasingly unlikely (to these old eyes anyway) that the Fed can keep the bubble inflated using the approaches employed thus far.

The only alternative may be to drop money from helicopt--I mean, super high tech jet fighters.

no positions