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Politics : View from the Center and Left -- Ignore unavailable to you. Want to Upgrade?

To: Paul Kern who wrote (103918)	2/11/2009 6:50:37 PM
From: Dale Baker	Read Replies (2) \| Respond to of 541990

The factor many people omit is the sudden drop in demand vs. the economy's productive capacity. Injecting more dollars will do nothing except stimulate idled capacity for a long way, hopefully long before we reach full capacity again and the extra dollars are chasing a more limited pool of goods. If the Fed can sop up the liquidity on the way back to some kind of equilibrium, the strategy works. I don't see inflation problems for at least several quarters in our current state.

To: Paul Kern who wrote (103918)	2/11/2009 6:56:06 PM
From: Bread Upon The Water	Read Replies (2) \| Respond to of 541990

PK: More or less correct. You get an "A". V: Thank you PK: We have to trust Bernanke to sop up that excess money as the economy improves and I'm not sure that he the backbone to do the job before we are saddled with stagflation. V: So the process is a very delicate balancing act? You first create artificial demand which then creates real sustainable demand? PK: It took Volker to get the job done and, by then, it was so late in the cycle that it plunged us into a 10-year recession. V: In the 70's? PS: Now that the stimulus bill has apparently ruled out aid to the states do you think that will provide impetus for the California legislature to resolve their differences?