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To: GST who wrote (98793)	1/2/2008 8:30:37 PM
From: Tommaso	Read Replies (1) \| Respond to of 306849

Also, the expansion of the money supply by fractional reserve banking--and expansion that results when a series of banks extend credit--is a topic for a final exam in Economics 101. I thought that maybe by posting Anna Schwartz's (a classic monetarist's) explanation of the process I would put an end to the discussion. But it didn't work. I wonder if we will have to go through the whole charade of price controls again when inflation heads up towards 10% a year. My own bet is that we will. Price and wage controls allow the government to give the impression for a few months that something has been done. When that fails (producers stop producing because they can't pass on their costs) there is nothing left but a Volcker-type discipline or helpless chaos and money destruction.

To: GST who wrote (98793)	1/3/2008 1:14:52 AM
From: lifeisgood	Read Replies (2) \| Respond to of 306849

That's a pretty long rant to make a pretty small point. I for one never said that credit can't cause inflation. I simply said that credit is not the same as cash. The former has a day of reckoning (some sooner, some later) when it must be returned to it's rightful owner with interest. best... LIG

To: GST who wrote (98793)	1/3/2008 7:58:22 AM
From: RockyBalboa	Read Replies (1) \| Respond to of 306849

I just reread "The Devil takes the Hindmost". I am no historian so it is not my claim that people learn nothing. Yet, the mechanics of a bubble and its unwinding still seem to remain the same in the medieval ages or the 21th century. As you posted about (easy) credit and its impact on inflation: a striking example is the South Sea Bubble: The exchange of an asset (public debt titles) with a relatively stable and well defined value measured by interest rates into stock with variable and to be defined conversion ratios; and the subsequent stock floatation with as little as 10% down payment did the remainder being loaned, after all contributed heavily to asset inflation in unrelated assets, like real estate, raw materials and livestock. I was wondering how that could be as it meant that lots of equity was extracted from the inflated asset class (bubble stocks). By means of credit only after the bubble burst, the general unwinding of excess credit depressed prices of all assets including those ones which havent been bid up earlier.