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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club
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To: Oblomov who wrote (7756)8/15/1999 10:50:00 AM
From: Sam  Read Replies (1) of 15132
 
Andrew,
Exacty, JFQ's scenario is deeply flawed. 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. It is like the difference between a company buying back stock so that they can use it for their new and generous employee option plan, or buying back stock to retire it.

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. Determining those "needs" is the tricky part. For the Fed to presume that tight labor markets necessarily lead to inflation is wrong too. They don't. And if they just let the markets work it out, they would, we don't need Fed intervention, we need Fed consistency in allowing the money supply to grow at, say, 2.5% per year, period end of story. More on this later perhaps.
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