The Great Reflation- By Boeckh (SUMMARIZED)

RATING:  5/5 (Great Book)


The book describes the Government’s massive Monetary and Fiscal stimulus program created to abort a potential Depression (caused by the recent credit crisis) and to generate an Economic Recovery.

During the crisis, US citizens were deleveraging (saving more, decreasing their spending, trying to sell their illiquid assets). This is very DEFLATIONARY

If the Government and Federal Reserve did not step in to fill in the holes created by the Debt Deleveraging, collapsed asset values, and excessive savings, the private sector’s efforts to get liquid would have caused a self-feeding downward spiral in the Economy. They ultimately saved the system from total collapse (however they were also responsible for the bubbles that created the issue).

However, the Monetary and Fiscal stimulus plans have triggered an avalanche of money - Efforts at Monetary Easing through asset purchases caused the monetary base to double in a matter of months.

Authorities like to reflate asset prices after a crash b/c it helps repair people's Balance Sheet. This has given fear of INFLATION. During the recession, the banks just held money in reserves and didn't borrow it, thus the Velocity of Money was much lower than it had been historically (almost neutralizing the potential impact of the Fed's action.) (It’s noteworthy to mention that the Velocity of Money has been recently rising)

Authors Concern: Once the process of reflating asset prices starts, the next mania is around the corner.

MY OPINION:  I think this book is very relevant in discussing what is occurring in TODAY'S economy, NOT YESTERDAYS, as most econ books tend to discuss the past too much and not focus on future implications.  I'd say this would be a good book for someone who has an intermediate-to-advanced understanding of Economics.