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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Mark Adams who wrote (64104)2/1/2001 8:46:33 PM
From: UnBelievable  Read Replies (2) of 436258
 
How Do You See That Happening?

To the extent that lending agreements are long term and call for fixed rates of interest, an inflationary money policy (where the rate of growth of the money supply is greater than the rate of growth of real goods and services) results in a transfer of real wealth from the lender to the debtor.

This fact makes lenders more reluctant to lend on anything but a short term or variable rate basis. Such uncertainty with regard to the cost of capital is a major disincentive and impediment to long term real capital formation which is required to produce real stuff for real people.

More money may mean increased stock prices. But no one is really interested in increased stock prices, they are interested in the real wealth that they believe the value of the stocks will enable them to enjoy.

Increasing paper money can increase paper wealth. It is not particularly useful for creating real wealth.

(Unless you are this weeks Pig of The Dow, IP, and have a PE of 77. <gg>)
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