Hmm... I think you're saying (for instance) that if there was a sudden mass loss of confidence in silver (for example
) as money, then the other forms of money would have to cover all the economic activity that silver originally handled -- there would be a scarcity of currency resulting in deflation. So since the debt was monetized, it behaves in this manner. Fascinating!
Generally, yes. The deflation would be of asset values, because there is less currency available. Securitised debt is treated as money at an institutional level; most individuals don't have access to it.
By comparison to the amount of debt being written off, there is much more being created at the same time.
you are wrong. the net difference btwn shadow banking credit and traditional bank credit is shrinking. this is a much bigger problem than you realize:
There's a fly in your assertion: is that nominal or real GDP? The former is a reflection of an expanding monetary system, the latter is real growth. The chart is also a year out of date, do you know of a more recent one?
It's important to note that in order to keep the system afloat, it isn't necessary for the Fed to inflate from the GDP level to the derivative level. Inflation only has to keep the derivatives
parallel to GDP. What's difficult about this is that the financial arena is struggling to prevent any contraction on itself, and that means continuing growth irrespective of GDP, whether nominal or real.
At the level of disparity between financial and real, a 1% relative rate of growth in each is vastly different from their absolute rates.
... the bank then becomes insolvent and the rating agencies have to adjust down the ratings causing stock investors to sell or short. banks would be forced to sell assets or raise more equity through stock dilutions as they scramble for cash. this is deflationary and drives up the USD. this is why banks so strongly resist taking the writedowns as it would wipe them out.
...
it isn't sustainable as you can't solve a debt problem with more debt.
The USD is effectively the fund for the USA, which is being run like the banks mentioned, at perhaps 100:1 leverage or greater. The rush to dollar cash post-2008 was an initial reaction. As the realisation set in that the dollar (and all other fiat) is in the same over-leveraged situation, there has been a tidal shift toward debt-free assets.
Everything is being done to accumulate these protective forms of wealth so that the institutions might survive, and there's a lot of competition among these institutions for a limited set of available resources.
A debt problem cannot be solved with more debt, but if the debt issuance can be slowed, recovery is possible. The problem is, we've passed that point and now nations will have to renege on their promised obligations - with disastrous results.
theoretically. but banks are facing all sorts of increased regulatory scrutiny and aren't just going to lend to anyone at this standpoint. the only loans they've given out the last 4 yr are those backed by the taxpayer or student loans which are non-dischargeable in a bankruptcy. now that lending is getting pulled back as student loan defaults have gone over 20% recently.
Banks are effectively living
hand-to-mouth. Funds
must be used, as
cash-flow is more important than reserves. If the precarious flow is not sustained, reserves rapidly deplete and banks start to default.
Since this flow is barely enough to sustain the financials, they can only scale down or grow.
Citi laying off another 11,000 employees is a sign of this - the weaker scale down, the stronger grow or consume their opposition. Any negative disruption to the flow will accelerate these actions.
I realise that your tendency is toward flipping properties, but that isn't what the banks are interested in - they look for revenue streams; cash-flow. It's like oxygen to them. While you may look for a property that can be increased in value for a small investment, the financials look for multiple properties that are net cash-flow positive. The two courses of thought are fundamentally very different.
and then you need to think like a criminal. if you were a bank, why would you want to buy any assets after a 4 yr runup from the March 09 lows and after a doubling of the stock market. why not just let the whole thing deflate and then swoop in and buy for pennies on the dollar?
You might have missed this:
deflation sounds good, everything gets cheaper, whats the problem?
Societal collapse, supply chain failures, war, famine, death. Sound good now?
It's important to understand the criminal mindset, but also the survival perspective; especially a criminal trying to survive. This is not business-as-usual, it's survival of the fittest. Any firm that doesn't play the game will fall and be devoured - they're all in survival mode, striving to see which will survive best.
i'm more of an optimist in that regard. although, i think things will get very rough when the collapse comes, i think it will mostly hurt Wall St as most retail investors have left the stock mkt knowing how crooked it is. at least i'm hoping so. i think Bitcoin will grind this corruption down into the ground over several years. perhaps fast, perhaps slow, i don't know for sure. but i think we'll all come out of this much better for it in the end so in that sense i'm very optimistic for myself and my family. 
