The fewer non-productive bubble activities we have, the better it is for those activities that actually crate wealth. But attempts to reverse deflation with new money creation only create new bubbles.
The repo crisis — and it is a crisis — is telling us that liquidity providers are aware that the price of money, the assets used as collateral and the borrowers’ ability to repay are all artificially manipulated.
Without a turn toward hard money, the odds are that the world’s dependence on the Greenback will not decline but presumably grow even more in the years to come.
In a true market — i.e., without a central bank — banks are intermediaries of real savings in their lending activities, thus promoting genuine and real economic growth.
Not only does fractional-reserve banking gives rise to monetary inflation it is also responsible for monetary deflation. Money created out of "thin air" can disappear as rapidly as it was created.
