The Justa & Lars Honors Bob Brinker Investment Club Message Board

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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club

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To: JF Quinnelly who wrote (7754)	8/15/1999 8:19:00 AM
From: Boca_PETE	Read Replies (2) of 15132

JFQ: RE:< Gov't Monetizing Debt vs. Paying Off Gross Public Debt > Thanks for your outstanding and educational explanation for the differences and effects of monetizing debt vs. paying off the national debt. I think we can agree that any move to pay down the national debt would need to occur gradually in order to avoid an inflationary effect on the economy and to avoid overheating the economy. The explanation assumes that if debt were immediately converted to cash, you would have the same quantity of goods to be purchased, but a new dollars in the amount of debt paid off chasing these goods. While I'd say some of this new high powered money would chase those existing goods, I'd think some portion of the new money would find its way into equity and fixed income investments. The effect of these new investments (new money chasing an existing supply of equity securities) would drive stock prices up and would also surely overstimulate the economy (new investments would increase the supply of goods and services). It would also increase prices of fixed income securities and lower interest income on those securities. P

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