In the classic noir film The Maltese Falcon, there's a scene that contains what I've always called "The Gutman Moment." Kasper Gutman aka "the Fat Man", the unsavory but well-heeled Sidney Greenstreet character, tells the protagonist
"Yes, but this is real coin of the realm. With one of these you can buy ten of talk."
I'll avoid spoiling the movie by telling why he says that, but its relevance to current events is as follows: Tim Oren has pointed out that
Since extensions of credit are de facto expansions of the money supply, we need to keep in mind that deleveraging the $11 trillion or so mortgage market, not to speak of the all of the derivatives based on it, could have a notable deflationary monetary effect. Just one more thing for the Fed to think about while considering the effects of acquiring all that bad paper, and perhaps tarnishing the sovereign debt to do so.
"A notable deflationary effect." From the big glitch in commercial paper, in the short term at least, and from other credit "unwinding" in the longer term.
Are we already seeing that in the price of oil? Is the ten dollars of talk turning into one dollar of real coin of the realm? Is this a Gutman Moment?
And is that all bad?