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To: Agamemnon who wrote (113142)	7/18/2001 1:02:02 PM
From: pater tenebrarum	Respond to of 436258

i would say that the fiat money system is very likely to blunt the deflationary impact of the K-winter, but it's not going to avert it altogether. actually, look no further than Japan to see how modern day deflation plays out. its effects are at first DELAYED by the central bank's interventions, but as the downwave continues, it tends to worsen. the reason: once the CB has reached the end of the line w.r.t. rate cuts, no additional monetary stimulus can be applied. even if the BoJ were to say begin monetizing govt. debt at a faster pace, the resulting liquidity would float about in the money market without takers. in the US, the simple fact that the stock market continues to trade below the level it inhabited at the time of the first rate cut is a strong sign that the same liquidity trap mechanics are slowly but surely taking hold here.