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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (60413)	5/24/1999 1:53:00 AM
From: JF Quinnelly	Read Replies (2) \| Respond to of 132070

The amount of money that the government prints won't affect much, currency being the smallest fraction of the money supply. The real problem in a deflation, the one that the government can't get around, is the lack of demand for credit and the concurrent unwillingness of banks to create credit. In the '30s, the U.S. money supply shrank by 30% in something like 3 year's time. Paradoxically, the public demanding currency in lieu of bank deposits contributes to such a contraction. As banks lose deposits their reserves fall and they are forced to call in loans. In the 30's, a run on a bank could mean the failure of the bank and a total loss for depositors since there was no FDIC to make depositors whole.