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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: FJB who wrote (18766)	4/13/1998 12:42:00 PM
From: akidron	Read Replies (1) \| Respond to of 70976

I'll call u crazy.... I don't

To: FJB who wrote (18766)	4/13/1998 1:26:00 PM
From: Clarksterh	Read Replies (2) \| Respond to of 70976

Robert - OT Money Supply Growth Rate: I don't know if Aki will reply or not, but here is my reason for being uncomfortable with long term high MS growth rates: The are at least two possible effects of a high money supply growth rate. The first, and most obvious, is inflation. So far this has not happened, and probably isn't likely to happen in the near future with the Asian crisis. The second problem is that periodic tightenings in the money supply are the only thing that seems to prevent the formation of bubble economies. Right after coming out of a recession there are a lot of places to effectively use the growth in money supply, but after a few years of growth all that money tends to be loaned to ever more questionable borrowers. It seems to be inevitable. So, you might say, who cares. If we go twice as long between tightenings we'll just have twice as bad a slow down. But it isn't linear. It is somewhat like being pelted by supersonic dust particles every 5 minutes. It doesn't hurt in the slightest. But if you save them up for a week or two you have a nice bullet, which can kill you. Ask the Japanese. The Fed is certainly aware of both problems, but they base their policy only on the first. They seem to be happy to comment on the second ("irrational exuberence"), but don't do anything about it. Clark