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To: Ron Struthers who wrote (40714)	9/23/1999 1:49:00 PM
From: Gary H	Read Replies (1) \| Respond to of 116790

Kitco $266.10

To: Ron Struthers who wrote (40714)	9/23/1999 2:16:00 PM
From: ahhaha	Read Replies (2) \| Respond to of 116790

Easy money policy has flowed into assets, rising prices, as a result only a small percentage of the world is seeing increased income to afford to buy goods. Then there must not be a world wide oversupply of goods. Most 3rd world countries are still trying to export out of recession. Most 3rd world countries have always been in recession, so why are efforts to export any different than always? China is in a deflation, China is inflating. other countries affected by the Asian crisis allowed their currencies to collapse to avoid deflation. This is exaggeration. Collapse? If the market rapidly changes your currency against some other, then does that mean collapse? Then I guess the dollar has collapsed against the yen, and therefore the US is in deflation? I guess you would have advised those Asian countries to throw away money defending their currency against the market. While the U.S. has plenty of $$, the rest of the $ debt world is crying for more. This is incoherent and has the taint of Harry Browne incompetence . The problem is now spreading into South and Central America. Which problem is that? The one you are imagining and the one nations should shoot themselves in the foot trying to address? CBs have temporarily halted the deflation wave by providing easy money for the U.S. consumer to go on a debt piling consumption binge The only CB which has been pumping is the FED and recently the BOJ has done the same. The FED has been doing it to support a waning prosperity whatever rosy scenarios amateurs like McDonough would like to believe. The FED is not trying to resist a deflation although much of the money they create flows through our borders and has the effect of propping foreign economies. The BOJ, in contrast, has pumped to resist deflation because they have a supply oriented economy in contrast to our demand oriented economy. When we inflate, it induces deflation in Japan. They have to inflate in order to keep up with us. Same with Europe. Where does Europe stand in this? They need to be pump too in order to avoid a fall in industrial output but which is not a deflationary occurrence. You are confused about assuming that a fall in final demand is equivalent to a deflation. This is a common error since it is very difficult for anyone studying economics in the US to conceive of anything but a demand oriented regime. The prejudice of demand orientation warps all judgements including theoretical ones. You have to separate money creation from interest rates and industrial production from final demand. Sometimes these variables are inversely related sometimes directly, sometimes entirely unrelated. It depends on every individual country. and OPEC countries managing to rein in oil production and raise prices. I don't believe these trends can stay intact or are enough Rising oil price is deflationary and it is the only factor that is enabling the FED from raising fed funds immediately. They are on hold as long as oil price rises at its current rate. The FED could care less how much M2 is being generated.