Replies to post #43051 on Mohacsy's Safe Portfolio Member Forum

[Elroy Jetson]

A large increase in M1 has to be inflationary, when monetary velocity is falling rapidly, . . . only in an alternate universe.

In the current situation, millions of people selling-off their assets results in a massive rise in M1. People selling assets to end their pain does not cause inflation.

Currently, "good debt" consists of loans used to short stocks and other assets. In 2006 this was the epitome of "bad debt", even though asset prices were far more excessively valued at that time.

You'll discover your "good debt" loan used to expand production of a factory or finance new inventory for your store has become a "bad loan" as the factory output and store inventory remain unsold.

The very concept of a "good loan" and a "bad loan" is a result of a fundamental misunderstanding of how the economy works. For a banker a "good loan" is one that's repaid, even if this loan is used for purposes which damage the economy or result in negative ecnomic benefit. A loan used to finally develop an inexpensive cure for cancers is a "bad loan" if it's not repaid.