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

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To: sandeep who wrote (52996)	1/2/2001 7:06:43 PM
From: UnBelievable	Read Replies (3) of 436258

The Interest Rate Is, Or Should Be, A Surrogate For The Money Supply The decline in the rate of growth in the US Economy is in part due to the cyclical nature of economic growth, and in part due to the tremendous malinvestment which was caused by the stock mania. There is nothing that changing the interest rates or increasing the money supply will do which will increase the rate of growth of real goods and services in the US. When the money supply grows faster than real goods and services the result is initially inflation. When the stuff produced per dollar printed declines the dollar will loose value to any currency that is not inflating as fast as the dollar. Given the significant trade deficit that the US has such a decline in the exchange rate will further exacerbate the inflationary nature of an increased money supply and also raise the real rate of return foreign investors will require due to the exchange rate loss they must anticipate when the repatriate their money. There is no solution to our problem now. In good years part of what is produced needs to be saved for the lean years. When in good years, not only is nothing saved, but the rate of borrowing from the future actually increases, what can be done when the lean years arrive. It has been thus since the beginning of time. From every harvest some of the crop needs to be saved to be used as seed for the next harvest. In good years even more needs to be saved so that the people can eat when the crop is not so good. When after 12 years of tremendous harvests not only has none of the excess been saved, and the seed crop has been eaten as well, people will go hungry. Don't be confused by the complexity, look for the simplicity. The problem is not enough dollars, the problem is not as much stuff as people would like. The money that was thought to be in the stock market was never there. The share price was only the price of the last share traded. The value of those shares is what they are actual claims upon when people wish to redeem them. Printing more dollars does not increase the strength of the dollar. Increased supply reduces the value.

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