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Strategies & Market Trends : Strictly: Drilling II -- Ignore unavailable to you. Want to Upgrade?

To: patron_anejo_por_favor who wrote (15935)	7/19/2002 2:51:52 AM
From: c.hinton	Respond to of 36161

You have a good point. The hardest part of inflating out of debt is getting new dollars in the pockets of those who need them.Unfortunately that means printing much more than is actually needed to pay off debt and accepting the fact that alot of those dollars will be wasted :like having a shot gun to kill a fly.There are lots of ways other than banks to spread the dollars.ie. Through gov.spending,welfare,tax rebates,gov bond redemtions,easy gov business loans ,just about any way one can think of.The alternative ,massive default and deflation,is politicly unacceptable.Just my opinion

To: patron_anejo_por_favor who wrote (15935)	7/19/2002 4:12:55 AM
From: nspolar	Read Replies (1) \| Respond to of 36161

patron [..., he can't. Why? 'Cause banks and other lending institutions are in the $hitter with their rapidly deteriorating loan portfolios, and aren't finding anyone to lend to who's credit worthy ...] I think that was one of the main points of McCulley's article .... Greenspan has to do something to get these banks to loan. The reality is he is extremely limited here, so in effect the probability of the outcome is really tilted towards the deflation side, ultimately. What happens in the middle is ongoing. Least that is my understanding. McCulley ...[The indirect way for the Fed to stop a Minsky Moment from becoming a Minsky Meltdown is for the Fed to order the banking system to quit withdrawing from "liquidity lending." Yes, I used the word "order" on purpose: commercial banks, and only commercial banks, have a special relationship with the Fed, as only they have access to the Fed's discount window. The quid pro quo of that special relationship is that commercial banks are supposed to lend when the capital markets are caught in a paroxysm of rectitude. Banks never want to do so, of course, as bank underwriting standards have a long history of being pro-cyclical: money for all during parties, and money for none during hangovers. When inflation was much higher, this was not an egregious problem. But now, with inflation near the "tipping point" into deflation, the pro-cyclicality of bank lending is noxious at the macroeconomic level. .......... Bottom Line It is time for Mr. Greenspan to order banks to expand their "liquidity" lending, and cease contracting it: good loans are made in bad times, and the time has come to make them! And as part of the "deal," it is time for Mr. Greenspan to commit actively to pursue higher inflation, by declaring the "doctrine" of pre-emptive tightening to be dead: short rates will not be raised to prevent rising inflation, but only raised once inflation is rising. Capitalism's beast of burden won't go away until the Fed is willing to slay it. It's time for Mr. Greenspan to use all his armaments. Unless he does, he will ride into the sunset himself as the Pretender, who started out so young and strong against inflation, only to surrender to debt deflation. ]