Michael Panzner is in the DE camp, because the bubble was caused by credit creation: "The way up is the way down" (a maxim of both Taoism and Heraclitus, apparently; but then the Greeks have always been great travellers and interested in ideas).
In his excellent book (reviewed here last May), he suggests that inflation will come afterwards (actually, not just IN- but HYPER-).
I don't like how he divides us into two camps: "was it "printing presses" that fueled the housing and other bubbles, the malinvestment and imbalances, and the widespread belief in 'something for nothing,' or was it excessive credit creation?"
ReplyDeleteI would argue the two are one in the same. The way that the government "prints money" IS by credit creation.
An interesting point that many people don't want to acknowledge is that there was credit destruction AFTER the dot.com bubble blew up and during thrifts crisis 15-20 years ago. If you look at a chart of M3, it has NEVER declined, even during periods of credit destruction.
I started a small debate on another blog about this and tried to compile my arguments into one long post at my site (yes, I actually wrote something ;) ).
Hi Matt: You should have warnbed me you were going to start up again! I'll have a careful read later. Should I put you back on my frequent read gallery?
ReplyDeleteYour point about M3 is interesting, because it's just so with M4 in the UK - never backwards in 40 years, only sometimes forwards more slowly. It's as though there are no economic ups and downs, only up faster or slower - yet individually we know that we get reversals of fortune. I must be missing something. Hope the answer is in your post.
No, I'm not starting back up. I just couldn't contain myself ;)
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