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Non-Tech : Money Supply & The Federal Reserve -- Ignore unavailable to you. Want to Upgrade?

To: Cush who wrote (372)	8/20/2002 1:22:32 PM
From: Ahda	Read Replies (1) \| Respond to of 1379

The life boats right now the FED is supplying ample dollars to get the nation afloat. If those dollars were going into start up companies employment would be increasing. There are numerous smaller companies closing down their expectations were for profit the results were too much debt. When one aspect or dept of a company supports another if their is a tax advantage it will do so until the advantage is no longer there as the profitable element of the company finds the profits is not enough to use the tax loss on the other end. It means the economy is not doing well. As Glen has been trying to assemble information that is very complex it is difficult not only for Glen but the FED to assemble enough information. I think that the simple fact is debt created cash flow for numerous operations. Where banks once just gave loans on a cash base the credit field could very well of become the largest portion of our economy. Where debt was used to finance growth debt is used for growth in the banking industry as well as in the general populous. Credit cards are not unique to the US they are convenient but in the industry of debt there is competition for more consumers of debt. American Express was a convenience for people and the cost of that card was for convenience it has has problems as the competition for debt is huge. The reality of this is that there are so many dollars to be paid in the future and the economy is struggling. Schools both public and private are increasing in enrollment as people try to increase educational skills hoping they can increase their future earnings. Banks have created a business out of debt but that business is no longer the profit that resulted from the last loan and the profit in pay off but the percentage that comes from numerous credit cards a scanty payments. So debt has become the product and the results of this new prime business is what we are all concerned with. The asset is the debt an increase in earnings means an increase in debt and the percentage factor that is actual cash that goes back to the company on debt that is not paid off but constant. This practice is inflationary. The consumer base of this nation uses debt too extensively in private purchases but if they did not the banking industry would be in terrible shape. it is not difficult to understand we tack price on because of debt in everything we do but is also not difficult to understand the cost of the product has increased due to the fact it is bought on credit. The price increase is not seen but tallied in as profits to the bank. If one looks at this as an economy that prime product is debt one can see looking at governments inability to meet budget that we create debt and with each new product we make to service that debt there is a built in increase in the price of a product. When debt becomes to extensive it can no longer be serviced. Then you have Argentina who could not service debt obligation to Brazil. The rules in our Banking industry have changed Bankers are not the conservative lot they use to be. Banks are out to make enormous sums of money but can the public create the money to repay the bank is what we are asking ourselves now. In accounting a debt is your asset until you have to write off as it will not be paid. When the cost to create a dollar is excessive due to the future debt that is tied to that dollar you have a dollar decreasing in value even if it increases in volume. To explain why inflation is more apt to cause recession and depression the simplest way i can think of is If the government owes X amount of dollars those dollars must come in in equal numbers or the debt cannot be paid. The debt does not vanish so the dollar base must increase in numbers so the dollars equal the debt. If you decrease the value of your currency the debt remains the same. The decrease only creates a more competitive external market. The decrease however decreases your ability to pay debts when you convert to other currencies. It is the value of the dollar that has to much debt in it that we question. Because all Nations have a great deal of debt then all dollars can come into question when the debt base is too high. That is why the Central Banks use to hold gold as it had a material value that could be calculated when currency had lost its value.