To: LLCF who wrote (1329 ) 5/15/2003 4:53:29 PM From: pater tenebrarum 1 Recommendation Read Replies (1) | Respond to please note that Bernanke's idea (later elaborated upon by the big cheese himself) of how to avoid 'deflation' (which is to say in this case, a decline in the 'general' price level, whatever THAT is) is ultimately self-defeating. it can't work. simply put: if the Fed begins to support a portion of the debt market in order to effect a 'reflation', it will end up being the ONLY buyer of this debt once reflation is actually seen as being successful. where does it end? the 'unsupported' portions of the debt markets would no doubt react, which then would force the Fed to support those too. however, when all existing debt is monetized, expect the currency to collapse (the Fed would then lose its power, the only good thing that would come of it). and when for whatever reason the debt support operation ends, you get a replay of the 70's.
