Although I have some sympathy for your general position Ctindale - sometimes you push your line to a fault. You say:
"you can't raise asset prices any other way than credit and no amount of money printing will change that"
I have to pull you up on this - what exactly could you mean here? I know you're aware that all printing is credit in this day and age. Yet your claim reads as though they are two different things.
Secondly - the effect of fed buying mortgage backed securities has unquestionably propped up housing prices. House prices have just gone up in the US four months in a row. Do you want to argue that this doesn't have something to do with the Fed purchasing 80 percent of issued mortgage securities this year? Good luck to you. Yet at the same time - US consumers do continue to deleverage as you say. But given this - we just have empirical confirmation that your thesis as you're stating here is just plain wrong.
Presumably you mean some modified version - that house prices can't go up unless housing related credit is going up (as opposed to credit overall). This seems fine. But I doubt very much you can find the evidence to support the claim that such credit has declined. I'd be keen to know if you can. More likely, the deleveraging is taking place on credit cards, personal loans - etc... i.e. non essential purchases. What's more - if you could find such evidence - then you'd refute your thesis in a more general sense since it's a fact that housing prices have gone up for the past four months.
Finally - there has been massive asset inflation across the board. You watch the stock market yeah? Commodites... etc... American liquidity is flooding the global economy on the carry trade with countries like Brazil publicly announcing their currency intervention explicitly to prevent the carry trade causing a bubble in their local markets because of their higher yielding currency.
Now - as I said - I have some general sympathy with your overall view that deleveraging will have a signficant deflationary impact in the years ahead. But I'll take you to task if the implication is that the fed is a powerless little rabbit in the headlights of an unstoppable liquidity trap. It's at least a roo sized bit of road kill - and it's money printing is going to at the very least tear a big hole in the radiator if it can't stop the car.
I think you need to more explicitly acknowledge this if you don't want to come across a bit dogmatic.
