Deflation Message Board - Msg: 18391067

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Non-Tech : Deflation

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To: Maurice Winn who wrote (204)	1/2/2003 12:08:56 AM
From: JF Quinnelly	Read Replies (1) of 621

A long piece, so being lazy I skimmed it. The Fed can monetize all the debt it can buy on the secondary market, which is basically all outstanding Treasury debt. It's prohibited right now from monetizing new Treasury issues directly from the Treasury- we did that in the '70s and it was highly inflationary. The secondary market process isn't as inflationary. Right now short rates are below the inflation rate, so they're pushing you to borrow. You can see gold and commodities starting to reflect the idea of inflation. I'd say we are at a saddle point where things could go in either direction. Some argue that if deflation gets a head of steam the Fed won't be able to stop the process no matter what they do. I dunno.

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