Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Sharks in the Septic Tank -- Ignore unavailable to you. Want to Upgrade?

To: gao seng who wrote (16885)	6/15/2001 4:08:55 PM
From: Neocon	Respond to of 82486

One thing I wanted to mention was that "money" is not a straightforward concept of currency in circulation. Although economists debate precise parameters, all agree that the extension of credit under a system of reserve deposits increases the money supply. Not only that, with each new deposit by a debtor, a new reserve is created for purposes of lending. Thus, the money supply is fluid, and depends both upon established rules of lending (for example, how much must be held in reserve for adequate liquidity) and the robustness of the economy, and willingness to take out both business and consumer loans. Essentially, the Great Depression was caused by the collapse of credit and a rapid deflation. With money in short supply, prices were driven down and interest rates were driven up, as people bid for credit. That meant that a lot of places had to sell at a substantial loss, and had a hard time making loans to tide them over. Although those who were working profited by the precipitous drop in prices, many were thrown out of work or off their farms as loans were called and firms went bust. The Federal Reserve did not act quickly enough to ensure liquidity in vulnerable banks, which would have prevented collapse and eased the panics that were destroying the economy. This lead to reforms that would ensure a more timely response to events. The main job of the Federal Reserve Banks is to make sure that things stay on an even keel by acting as balance wheel for the money supply, regarded broadly. They do this both locally, in response to condition in their territory, and nationally through the Federal Reserve Board. They are supposed to prevent large fluctuations in the money supply. Although politically accountable, they have been partially shielded from politics in order to avoid pressure to use monetary policy for political ends, for example, by creating rapid inflation to favor debtors........