Clown-Free Zone... sorry, no clowns allowed Message Board

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Pastimes : Clown-Free Zone... sorry, no clowns allowed

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To: eddieww who wrote (46195)	12/11/2000 2:52:51 PM
From: pater tenebrarum	Read Replies (1) of 436258

because too much industrial overcapacity has been created..like in the 20's, this results in a productivity explosion, and inflation being channeled into financial assets and real estate. you must remember how fractional reserve banking works...in order for the money supply to keep growing, debt must keep growing. however, debt has outgrown the economy by a huge margin in recent years, so we are nearing the point where it becomes impossible to service even some of the existing debt, let alone create new debt. this is why disinflation asset/credit bubbles always end in a deflationary downturn...as borrowers scramble to raise cash and increase their savings, resulting in a consumption cutback coinciding with the final batch of industrial overcapacity coming online. you can blame the Fed - were it not for the Fed having held short term rates too low for too long a time, the overcapacities would likely not have been created. look at Japan...best modern day example of a central bank being unable to create inflation, despite its best efforts.

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