you were saying that cheap money can't be avoided in fractional banking. i say that it can. high interest rates makes money 'dear'. and letting the market set interest rates, avoids cheap money. and cheap money (from bad FED policy) is the cause of the disaster that's coming.
since 1913 we have gone periods of a decade or more where the monetary base has remained quite flat. M1 and M2 count things that aren't dollars, like bonds, travelers checks, etc. they are called money substitutes. i don't see a reason to count those as money, because when we think of 'money' we are really thinking about dollars. and the monetary base (dollars) has never declined. you weren't the one that claimed that there has never been fewer dollars, i'm the one who said that. i was making the point that the number of dollars can't be the only thing that determines their value, since we have experienced declining prices (price deflation). if the number of dollars determines their value (as you seem to be saying), there would never be price deflation, since the number of dollars, (not M1 or M2), has never declined.
i had a long running argument with skeeter bug about this very thing, on the original residential real estate crash index thread. i proved to him that even if the entire stock market were wiped out in one day, it wouldn't change the supply of base money. the amount of dollars in circulation would remain the same as before the wipe out. the monetary base didn't change in 1929 either. yet prices fell. that means that dollars gained in value even though there weren't less of them.
notice i'm not saying that greatly increasing the number of dollars won't cause some price inflation. but doesn't this make you wonder how a dollar gets it's level of value? |
