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To: Haim R. Branisteanu who wrote (11323)	8/15/2000 9:30:16 PM
From: pater tenebrarum	Read Replies (1) \| Respond to of 436258

Haim, i fully agree - and i think it has been highly irresponsible by the Fed to not tighten monetary policy sufficiently at an earlier stage of the credit bubble to stop the reckless expansion of debt in its tracks. yes, there might have been a recession interrupting the '90's boom, but the economy's fundamental long term health would have been much the better for weeding out the excesses before they grew to the current gargantuan proportions. to simply tie monetary policy to inflation rates (let's not even mention that the inflation rates as reported do NOT reflect reality) ignores the experiences of previous disinflationary booms like that of the 1920's...Greenspan himself wrote an essay on the subject in which he vividly described the Fed's policy failures of that decade. well, he has now repeated them to the T! what's more, the longer the boom is allowed to continue (the avowed, and often publicly stated goal of current Fed policy) the worse the imbalances will get, and the more devastating the eventual bust. and no amount of pump priming will stop a deflationary asset and debt collapse - the monetary levers become useless in that situation! the monetarists have created the false rumor that the depression of the 30's was due to the Fed not priming the pump enough...that's complete hogwash. a liquidity trap can't be printed away by a CB. on the contrary, it was the reckless monetary and credit expansion of the '20's that was the root cause of the depression. the Fed immediately lowered rates sharply after the 29 stock market debacle - and continued to lower them in the following years. ultimately the depth and duration of the depression were unnecessarily extended by the misguided interventionist statist policies of 'new deal' Roosevelt. like you say, the side of the balance sheet where the debt mountain resides will not change - what will change is the value of the assets collateralizing the debt as well as the ability to service it. i'm off to watch a movie...good night.