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

To: John Vosilla who wrote (27999)	3/7/2005 11:51:40 AM
From: Elroy Jetson	Read Replies (1) \| Respond to of 110194

Therein lies the fatal flaw of the Currency Crank, or the Monetarist as they prefer to call themselves today. They believe they can solve debt induced financial bubble with yet more debt creation - enough to drop rates from 6% to 1%. Increased borrowing demand in a normal economy pushes interest rates up. This tends to make financial bubbles self-extinguishing. By contrast, in a Monetarist economy, the central bank creates as much credit out of thin air as is demanded by the market - without regard to supply. Thus, as demand for credit increases in a Monetarist economy, the supply of money actually increases, pushing down interest rates. This tends to make financial bubbles self-sustaining in Monetarist economies - without hope of a soft landing. .