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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: No Mo Mo who wrote (5454)7/24/2000 6:53:39 PM
From: pater tenebrarum  Read Replies (2) of 436258
 
D, there's a qualitative difference between actually paying down a debt and monetizing it. the former is (apart from a short term effect)neutral from a monetary PoV. in fact, the less the govt. crowds out the private sector from the capital markets , the better (that's the theory, anyway).

inflating the money supply by monetizing the debt is an entirely different cup of tea, as it debases the currency when done in too profligate a manner. since money supply growth has been far in excess of economic growth over the past decade, you can bet that the currency has in fact been debauched.

being in a disinflationary secular cycle has only meant that much of the monetary inflation has simply been channeled into asset prices - although any simple private inflation survey will quickly reveal that depending on your income, inflation has been very real. in fact, the lower your income (i.e. the more of your income is being used up by spending on necessities), the higher the inflation rate is.

the treasury's buybacks, which are distinct from the Fed's open market operations, do of course also have a stimulative effect on the economy, which as you stated has been desperately overheating, a brief Q2 lull notwithstanding.
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