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To: Dinesh who wrote (88390)	3/26/2010 5:25:12 AM
From: Crossy	Read Replies (4) \| Respond to of 118717

Dinesh, looks like Sober seems to have been fallen prey to an old fallacy that in normal times can only seen with gold bugs - he seems to define "inflation" with any kind of "increase in the money supply". However this is blatantly wrong from textbook economics. All economists (Keynesians, Monetarists and mainstream fellas alike) define inflation as an "INCREASE in the PRICE LEVEL" not as growth in the monetary base. a look back at the 80ies and 90ies should clearly allow everyone to wintess periods of orderly money supply growth without inflationary threats. If you like to explore the topic, search for "Milton Friedman" and the "quantity theory of money". He early on found out that inflation free growth can be achieved by allowing the monetary base to increase at the same rate as nominal GDP, provided the velocity of money stays constant. A side note: during financial crises, the velocity of money dries up as ordinary people start hoarding cash. This allows the fed to temporarily increase the monetary base to offset the cash hoarding and its fallouts. Had they not done that, the deleveraging effects would have rippled through the economy in a 30ies fashion just some thoughts CROSSY