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A Money Demand Shock not fully offset by the Fed

January 3, 2011

I would disagree with that statement because it misses the point of how and why the money demand shock came about, and that the unfolding crisis is still about liquidity and not solvency.  Additionally, money supply using the numbers he uses is not that useful overall – I prefer things like the total USD Public deficit because it makes sense from an accounting standpoint, per National Accounting Identities.

But I do like the wonderful charts associated with this post.  The demand for liquidity went up by nearly every measure.  Good Stuff.

When I have some time later tonight, I will go through numbers to estimate the size of QE necessary to bring these ratios back into pre-crisis levels.

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