Sunday, January 16, 2011

ALERT: Major Inflation Signal

WSJ reports:
U.S. banks are expanding their loans to consumers for the first time since the credit crisis erupted, as lending standards begin to loosen and demand for new loans edges higher. 
J.P. Morgan Chase & Co., which Friday posted a 47% profit jump for its fourth quarter, said its total loans increased 6% since the end of September. While most of the loan growth came from loans to businesses, the nation's No. 2 bank by assets said total credit-card balances rose for the first time in two years.

Consumers were more willing to pull out their plastic. Credit-card usage was up 10% year-over-year. The bank issued 3.4 million new credit cards in the fourth quarter, up 4% from the same period a year earlier.

Increased credit card usage is another indication that Fed money is increasing in the system and that consumers are decreasing their demand to hold cash balances.

This is very price inflationary, as it means that not only will the new money the Fed is printing result in more bidding for goods and services, but that consumers are more willing to use the money in their wallets to bid for goods and services. The price inflation that is just ahead will completely surprise the Keynesians.


  1. Weimar Germany style hyperinflation on the way, possibly?

  2. You have been talking a lot, lately, about Bernanke's last round of money printing. The problem is that the stats do not show a sharp increase in the monetary base. To the contrary, the Adjusted Monetary Base has been roughly at the same level - 2000 billions of dollars - since May. Check the stats:

    So, two possible scenarios of what is really is happening arise in my mind:

    1- The stats are false
    2- Bernanke has been "sterilizing" its most recent purchases by selling other assets.

    If 2. is true, then Bernanke has not been inflationary lately (at least, for this last year, where the monetary base actually DECREASED of about 200 thousand billion euros.