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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club -- Ignore unavailable to you. Want to Upgrade?

To: Oblomov who wrote (7756)	8/15/1999 10:50:00 AM
From: Sam	Read Replies (1) \| Respond to of 15132

Andrew, Exacty, JFQ's scenario is deeply flawed. Just because the debt gets paid, it doesn't mean that all that money is sloshing around in the system, the Fed could just "retire" some of it, take it out of the system, if they thought that that was the right thing to do. It is like the difference between a company buying back stock so that they can use it for their new and generous employee option plan, or buying back stock to retire it. The point really is, nothing is inherently inflationary except for the Fed printing more money and releasing it into the system beyond what the system needs. Determining those "needs" is the tricky part. For the Fed to presume that tight labor markets necessarily lead to inflation is wrong too. They don't. And if they just let the markets work it out, they would, we don't need Fed intervention, we need Fed consistency in allowing the money supply to grow at, say, 2.5% per year, period end of story. More on this later perhaps.

To: Oblomov who wrote (7756)	8/15/1999 9:15:00 PM
From: JF Quinnelly	Read Replies (1) \| Respond to of 15132

Most M1 is held as checking deposits, and as such will be multiplied many times over through the fractional reserve process. Assets held in Treasuries won't do that. And there's no way to predict how much of the new M1 would be converted to savings. All that new hot money looking for a home would certainly inflate securities, real estate, commodities, and most everything else. There was a deflation when the debt was paid off in the 19th century, but since we now use fiat currency I don't know if we'd see a repeat.