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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club
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To: Sam who wrote (7758)8/15/1999 9:37:00 PM
From: JF Quinnelly   of 15132
 
Just because the debt gets paid, it doesn't mean that all that money is sloshing around in the system, the Fed could just "retire" some of it, take it out of the system, if they thought that that was the right thing to do.

The Fed currently uses Treasuries to "soak up" high-powered money, a tool they wouldn't have if there was no debt. No debt, no Treasury instruments. They would still have the ability to alter reserve requirements, but that's a cruder tool than selling Treasuries to dry up excess liquidity.

The point really is, nothing is inherently inflationary except for the Fed printing more money and releasing it into the system beyond what the system needs.

That's hardly true. "Printing money" has little impact, and would even be slightly deflationary since it takes money out of the banking system. The great engine of inflation is credit expansion in the banking system, no currency needed. On a technical point, the Fed doesn't "print money", that's a function of the Treasury.
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