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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Lhn5 who wrote (36225)	7/25/2005 5:11:58 PM
From: Elroy Jetson	Read Replies (2) \| Respond to of 306849

Perhaps we can use gpowell's definition of Monetarist prudence. "the data shows that nearly all of the increase in reserves, under Greenspan, has come from increases in currency and most of that has gone off-shore, or into domestic cash balances. You can’t force foreigners to hold dollars, and, domestically, people choose to increase their cash balances. Therefore, as difficult as it may be to comprehend, central banks are acting very much as if there is a fixed reserve." - gpowell ************************************* I agree with your observation that Alan Greenspan has created a torrential growth in cash deposits, as revealed in MZM. You suggest this is an example of central banking prudence in action - something like a gold backed currency. This is where we differ. Now why do you suppose all of this liquidity was created? Oh yes, consumer preference. After excessive debt creation has inflated asset prices and people wish to sell, you suggest Alan Greenspan "simply had to create more money to accommodate their desire for liquidity". How interesting. This is your Monetarist vision of the "market" in action. I had forgotten that the intaglio printing presses were named "Market One" and "Market Two". In a gold backed currency, the amount of currency cannot simply expand ten-fold to accommodate asset sellers, as Greenspan has done. In a real market economy, the price of assets decline when there are more sellers than buyers. Everyone cannot sell at full value creating a ten-fold increase in cash deposits. But Monetarists must maintain the fiction that rising asset prices are in no way connected to the fact that debt is being created at twice the growth rate of the economy. "Simply creating as much money or as much credit as the market requests" is not a market function -- it is a Monetarist hallucination. Supply and demand is not a market when the supply is artificial and infinite. - Elroy Jetson .