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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Richard Nehrboss who wrote (70144)	11/6/1999 10:45:00 AM
From: Mike M2	Respond to of 132070

Richard, I have not examined the money supply expansion for every year but I suppose the greatest expansion occurred during WWII 1939-45. Between 1939 and 1965 ( 65 not a typo) the US money supply increased four fold with 3/4 of that expansion occurring during WWII. It is important to distinguish between gov't debt and private debt. Public ( gov't ) debts tend to be monetized whereas private debts must be paid or liquidated. The late Hamilton Bolton founder of the Bank Credit Ananlyst noted " history shows that big slumps have been the result of large private debt structures. History does not show slumps caused by liquidation of public debt structures. The larger the private debt structure, relatively, the greater the danger of liquidation, or deflation " (aka TOUGH LOVE)-g- from Bolton " Money and Investment Profits" available from fraserbooks.com . I can't quanify the proportion of public debt from the monetary inflation of the 60-70s but I would guess much of it came from the gov't LBJs Wars on Poverty and Vietnam - One that Slick managed to dodge! I don't recall getting a draft notice is about as believable as I don't recall when I lost my virginity. Back to the topic with private debt expansion at some point balance sheets become so strained that a retrenchment is necessary these debts must be paid or defaulted on - either way you get deflation- a contraction of credit. It is interesting to note as the 20s boom progessed it took an more credit to finance the boom in the 1920-21 business depression we saw .33 bank credit to 1.00 dollar GDP growth, later 1925-9 0.62 , 1926-29 1.00 . I have some more recent figures I will post later but at the peak of the 20s credit boom we saw 2.00 debt for every dollar of GDP growth we have recently hit 5.00 ! What this tells us is much of the debt is funding speculation not productive investment which makes this debts credit worthiness more doubtful because how is debt repaid - from future production. In 1998, if memory serves corporations spent 125 % of earnings to repurchase their stock this is financial engineering not investing in productive capacity for the future. I am in the middle of a project so I will add more later. I know this note may raise ? and there is more that I would like to add later. mike