Telling action in bank stocks says the limits of helping Wall Street may have even run out.
Many point to excess reserves as a sign of future inflation. I point to excess reserves as a sign of failed Fed policy. Commentary from Austrian economists shows they fail to understand how credit even works.
The idea those excess reserves are going to pour into the economy in a 10-1 leveraged fashion is simply wrong. Banks do not lend when they have excess reserves. Banks lend when they have credit-worthy borrowers, provided they are not capital impaired.
It is time Austrian economists finally wake up to this simple economic truth.
- The Monetarist currency cranks want more monetary stimulus even though it is counterproductive
- The Keynesian clowns simply will not admit end-game constraints
- The Austrians for the most part either ignore credit or incorporate failed models of credit expansion into their theories.
Each camp points the finger at the others as to why the others are wrong. Ironically, none of the camps seems to understand the combined mechanics of debt-deflation, deleveraging, and attitudes.