Related to the FED increasing its balance sheet read Frances Coppola's "Banks Don't Lend Out Reserves" and pay attention to Lee Adler's comments as they add to the understanding rather then obfuscate and deflect as with most of the discourse on the web.
CLSA strategist Russel Napier made the rounds in late November and early December 2013 with his pitch that deflation is in our future. I sympathize with many tenets of Napier's analysis (overcapacity, stock market valuation, emerging market debt issues, bank credit contraction) but disagree with his final conclusion -- a 70% correction in the S&P 500 -- given the fact that central banks are 'all-in' in terms of reflationary policies such as quantitative easing to prop up asset prices. A baseline scenario for me is continued stagnation given the dearth of effective demand. The most healthy dynamic in a market economy requires countervailing power from competing sectors however at present the aggregate power of labour (and by extension households) has been in steady decline for a generation and the waning of credit extension augers poorly for future growth prospects in advanced economies.
