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To: Tommaso who wrote (54422)	8/7/2006 7:27:16 PM
From: YanivBA	Read Replies (4) \| Respond to of 116555

I agree that because the government can print dollars, if it wants to, it can stop prices from going down. The question is for what price and to what object will it do that. The reason that the government and the central bank turn to fiscal or monetary expansions is that they normally produces growth which normally produces jobs which normally produces votes. The link between a monetary expansion and growth uses two channels. One is credit financed investment demand and the other is credit financed consumer demand. However, it is a fundamental aspect of a credit contraction situation that both those channels are mutilated. If banks do not wish to loan to anyone because they know they would not see the money back than no one get a loan. And all the monetary expansion in the world can not change that. So the government can print all it wants. What will happen is that prices would go up. Deflation will be over but the depression will continue. No growth, no jobs, no votes. And the cost to the ruling elite will be that the poor would be off the hook. They would have all their consumer debt inflated away. A fiscal expansion is another thing all together. A fiscal expansion directly produces jobs so at a first glance it should work all the time. Unfortunately government operations destroy value so real income goes down as government size goes up. If real income goes down people feel they are working harder and harder just to stay in the same place. They become unhappy, grumpy and start to constantly vote for the opposition. Sounds familiar? To get the votes back what the government does, in many cases, is it goes to war. A war unifies the nation around the leaders providing support for the otherwise unwelcome fiscal expansion. Needless to say war is the greatest destroyer of value but as the blame usually lies in the enemy and not in ourselves the government keeps getting those votes. Until it doesn't. And the poor still get to have their debt inflated away. YanivBA.

To: Tommaso who wrote (54422)	8/7/2006 7:35:42 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

It all depends on one's belief of money. I think there will be a credit contraction (via bankruptcies) and and a housing implosion that will dwarf all atempts to inflate. It happened in Japan, yet you act as if it is impossible. Japan PROVED it is possible yet people think "It can't happen here". Gold has little to do with it. It certainly had nothing to do with Japan. Mish

To: Tommaso who wrote (54422)	8/7/2006 7:47:08 PM
From: shades	Respond to of 116555

(I mean, who wants to hold a paper currency as a store of value?) A lot of people obviously - many are so lazy they hold it in savings accounts that only pay 1% because they are too lazy to go get 5% by clicking a few buttons or signing a couple pieces of paper. That is the way of most of mankind eh? Even that is too cumbersome - the new MONOPOLY game is coming with credit cards instead of paper money - paper money is just too complicated! Look people that have excess "wealth" and are too lazy or too stupid to generate more "wealth" with it personally and directly hand it over to some bank loan officer to choose where to invest eh? He goes and loans it to princess on her new house and hopes she pays it back eh? Some go give it to the mutual fund experts - they aren't quite as lazy as the 1% savings account people - is a loan officer much worse than a mutual fund manager? He goes and puts the money with lying companies that have fradulent accounting tricks and backdated options eh? We are too lazy to wipe our own kids butts or clean our own houses - so like Elroy we hire a house keeper - too lazy to grow our own food or even educate our own kids - hire all that out and don't pay the food service workers or teachers very much - then the kids grow up fat, sick, or dumb - is it a surprose? - why would we not be too lazy to work our own finances given all these other truths? hehe We have elected a president that believes research scientists are evil tools of the devil in search of the demonic fruit of knowledge and have lost thier moral compass and 50% of people think there are still WMD's in Iraq - its all so surreal.