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To: MSI who wrote (7851)	1/4/2003 7:08:53 PM
From: JF Quinnelly	Read Replies (1) \| Respond to of 306849

The other point is whether the current model of interest-bearing notes is expensive and deceptive in practice, in lieu of controlled direct issuance. The only interest bearing notes involved are Treasury securities, so I don't know that these are deceptive, really, the amounts issued by the Treasury should be readily available. Surely it is better to finance the government's deficit spending with loans to the Treasury, rather than directly issuing currency to cover such excess spending- we had somewhat of an experience with that in the '70s when the Fed was purchasing new debt directly from the Treasury, which has the effect of directly issuing new money to cover excess spending. The result was the inflation we experienced. Currently the Fed is prohibited from monetizing debt by directly purchasing Treasuries, it must buy them on the secondary market. A portion of the money supply probably is "direct issuance", if I understand your term correctly. The "US Notes" that were printed up til 1963, which were the echo of the 1864 Greenback issue, and the amount of currency that used to be Silver Certificates. These were all absorbed into later Federal Reserve Note issues, because functionally they act the same, and of course currency is no longer convertible. As long as you maintain a fixed issue of money you won't have inflation, such fixing acts as a defacto gold standard. I think it is Milton Friedman who has advocated a constant, slow increase in the money supply, geared to the long term growth rate of the economy. That would would be a direct issuance that shouldn't have a debasing effect. MSI doesn't stand for "Milton Friedman", does it? Of course, that still won't reduce interest payments on the national debt, we would have to use a sinking fund like Jefferson's to accomplish that.