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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: YanivBA who wrote (70101)9/22/2006 4:38:29 PM
From: bart13  Read Replies (1) of 110194
 

If you are referring to the central bank increasing the money supply and foreign currency reserves, again this has been tried by the BoJ with very little success.

If you think in terms of deflation as a decline in prices due to a contraction of the money supply it's not at all clear how could deflation be. This is what Bernanke was commenting about in the infamous helicopter drop speech. he can't understand how is deflation possible in the face of a determined increase of the money supply.


And the record of the BoJ basically supports what Bernanke said. When the BoJ turned up the volume in 2002-3, CPI went positive after a normal lag:



Similar responses also occured over the decades:
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