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To: BGR who wrote (70817)	10/21/1999 1:04:00 PM
From: pater tenebrarum	Read Replies (1) \| Respond to of 86076

BGR, there have been instances in the past when excessive credit and money supply growth have not led to CPI inflation...notably the 1920's in the U.S. and the 1980's in Japan. however, inflation was in both cases simply channeled into asset prices like stocks and real estate. it's precisely this set of circumstances, a disinflationary environment in terms of CPI that leads to too lax a monetary policy that in turn leads to a bubble economy with the attendant bubbles in credit and assets. this however is not healthy...on the contrary, we know from the lessons of the past that these bubble periods are inevitably followed by periods of extreme financial and economic distress. the Fed is well aware of this and thus dares not to pop the bubble...thereby virtually assuring that asset price inflation will eventually find it's way into the prices of goods and services. the fact that the department of Labor statistics seem not to capture the full extent of the price rises that have already taken place, e.g. in housing, is a mystery to most observers....of course there's also the way these statistics are collated, with their assumptions about quality improvements and perfect substitution...the latter being a complete mirage with no connection at all with reality. since it is in the governments best interest to understate CPI we should actually not be surprised. however, there can be no doubt that excessive money supply growth eventually erodes the value of a currency. hb