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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Ilaine who wrote (6127)	7/20/2001 11:01:17 AM
From: Mark Adams	Read Replies (2) \| Respond to of 74559

I would hope that the book simplified the presentation of supporting data, being aimed at the lay audience, yet represented well founded conclusions. I see that he offers an expensive newsletter, so he may be another person just cashing in on the info expert stream of income. I was thinking about this last night, and I believe savings is the missing link. If the fed prints a new $100 bill, and gives it to me, and I bury it in the backyard, there is no immediate inflation. In fact, if I earn $100 digging a ditch, and bury it in the backyard, my savings have a deflationary effect- shrinking the pool of money available to purchase goods. This assumes the velocity of the remaining money remains constant, and the 'savings' is not available to other parties to spend or invest. At a later date, after the system equalizes with it's new smaller pool of money, I dig up the $100 and visit Las Vegas. Suddenly my prior savings expands the pool of money, while goods remains constant. Again, we don't that the velocity of money will change (I'm increasing it slightly by deploying money that previously had no velocity), but the expenditure of prior savings (dis-saving) should have a slightly inflationary aspect. It seems most of the thinking I see looks at money supply in relation to goods & services, ignores the velocity issue and completely overlooks the impact of the consumer propensity to spend vs save. Perhaps we could simplify this by incorporating the savings/dis-saving issue into velocity. Another issue ignored that ahhaha alluded to is the idea that the supply of goods and services aren't fixed, but will vary with demand. Printing an extra $100 should dilute the value of the remaining money stock. But is it also possible that the added demand will soak up that money, perhaps resulting in only $10 worth of dilution? Just a hypothesis... If money is truly just an abstaction which represents some other person's debt, then you might say the credit contraction of the 30's (everyone demanding accounts be brought current) would be very deflationary. No?