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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (27910)	3/6/2005 10:02:35 AM
From: Tommaso	Respond to of 110194

>>>you keep assuming that because money supply is rising that it is guaranteed to do so. I think that is our biggest difference of opinion.<<< No, I do not assume any such thing. But changes in the money supply generally do not have much effect on economic conditions until about two years later. It does sound as if you assume that the money supply will start to decline. If I ever see the money supply declining for six straight months at an annualized rate of decline of five percent, I will start to believe that deflation is a possibility. But with the horrible example of the period 1931-33 still in mind, the economists of the Federal Reserve will do whatever they can to stop it. The reasons for the disastrous contraction of the money supply in the Great Depression were hoarding of cash, distrust of banks by depositors, distrust by banks of lenders, inability of many people to continue to make mortgage payments--a general contraction of credit and also a decline in velocity. What we see right now is exactly the opposite, especially the "cash-is-trash" mentality of the more reckless speculators in real estate. Right this minute! I certainly believe that it is POSSIBLE for the government to cause deflation. It is also possible to do other things, such as demolishing all the hydroelectric dams on the Tennessee River or blowing up the Grand Coulee.