The Great Reflation: How Investors Can Profit from the New World of Money

Preface

The financial crisis, the speculative bubble leading up to it, and the aftermath have proven once again just how true the old saying is that if you want to know what's going on in the financial system, watch the banks. The banking system has always been the centerpiece of liquidity flows, and financial markets are driven principally by changes in liquidity. This is best assessed through indicators that monitor the flow of money and credit.

Richard Dana Skinner, writing in the 1930s, was one of the early pioneers in the study of money and credit, and the creation of indicators that monitor and forecast financial markets. Interested students of this approach will find plenty of value in his Seven Kinds of Inflation.^[1] Skinner was instrumental in helping investors better understand financial markets. He, like many, was shocked, not only at the damage caused by the 1929 crash and the Great Depression, but by the fact that so few people saw it coming and that there was no acceptable theory or practice in dealing with it. A. Hamilton Bolton,^[2] founder of the Bank Credit Analyst (BCA), picked up on Skinner's analysis and techniques and further refined them over the course of 20 years until his death in 1967. I came into the BCA as his replacement and was the principal owner and editor-in-chief for the next 35 years, during which time we continued to refine the money and credit approach to help in understanding and forecasting financial markets.

In its simplest form, this approach ...