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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: Oblomov who wrote (1530)	4/6/1999 9:14:00 AM
From: Freedom Fighter	Read Replies (1) \| Respond to of 1722

Hi Andrew, >>That is, in a deflationary period, the "natural" level of interest rates would be negative. However, in order to encourage the participants in an economy to keep money in the system (vs. hoarding), the central banker must keep rates at or above zero.<< This is s a very interesting issue. One that I hope to get a better understanding of even though it's not applicable to my investment methods. I have one observation about your statement above. If we had a monetary system where the money supply remained steady and deflation resulted from productivity gains, central bankers would become obsolete. Interest rates would be set by the market instead of human judgment. Of course this assumes that Murray Rothbard is correct and the system could function well under that scenario. I am not totally convinced one way or the other. I am however, fairly certain that prior U.S. depressions and Japan's current circumstances teach us nothing about that possibility though. They are the result of other weaknesses in the monetary system. WC