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Politics : Ask Michael Burke
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To: Terry Maloney who wrote (78880)4/1/2000 9:42:00 AM
From: Tommaso  Read Replies (2) of 132070
 
If the "core rate" of inflation is not soon up to 6%, then monetarism is meaningless. It's already beyond that when energy prices are included.

I wonder if the rising US interest rates might be pulling in huge amounts of dollar deposits that our out-of-whack trade balances have created overseas. The repatriation of dollars would certainly affect the US money supply.

The stock market bubble of the 1920s was financed in part by money pulled in by high margin interest rates that people were willing to pay to hold stocks.

I doubt that there is anyone who undertsands all the financial mechanisms at work right now. Indeed, the 1920s have never been sorted out to everyone's satisfaction.

One thing that does seem clear is that, even with the bulge in the money supply, there is no way that more than a small fraction of the "wealth" held by people in stocks can ever be converted into spendable dollars. The money simply is not there. And the effort to liquidate even a small fraction of this "wealth" will result in its evaporation.
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