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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 4:56:00 PM
From: Investor2  Read Replies (1) of 15132
 
Thanks for the very thought-provoking post.

Re: "Paying off the debt isn't exactly the same as monetizing the debt, but it almost surely would be inflationary. The Treasury would be exchanging currency, 'high-powered money', for Treasury bills, bonds, and notes. When assets are held in the form of Treasury debt they are tied up and don't get spent. When assets are held in the form of currency and checking deposits, 'high-powered money', they get spent."

Your use of the terms "high-powered money" and "they get spent"
somewhat implies that people will take their T-Note sale proceeds directly to K-Mart and Best Buy to do some high-powered shopping. I agree that this would result in an upward pressure on the prices of goods. However, most of the T-Note sales proceeds would probably be invested in corporate or municipal bonds or in equities. This would tend to result in "asset inflation," rather than "product inflation."

Best wishes,

I2
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