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bruceb@xxxxxxxxxxxxx wrote:
>Why, because of all the potential threats to the US economy, this is by far the easiest >problemto fix.
> What got us into the deflationary cycle of the 1930's? The government
> contracted the money supply at the very time they should have been expanding
> it. What got us out of it? A massive expansion of the money supply to pay
> for World War II (some things you learn by trial and error...).
>
> Bruce
Bruce:
Personally, I'm not particularly interested in forecasting where the markets are
going--I'll trade them if they go up or if they go down. And until now, I've
read your personal opinions of how the world works and found them interesting. I
don't agree with all of what you've written, but that's what makes the world go
round.
Now, your statement about deflation being simple to end...I was trained as an
economist at the University of Chicago. In fact, while there in their joint
degree program in the late 1970's, I paid for my schooling by doing research for
the BLS. In theory, deflation can indeed be cured simply by printing lots of
extra money. But you speak about it as if the economy will react and turn on a
dime. It isn't that simple and it doesn't work that way. No matter what you
read.
I gave a speech at a dinner in Princeton, NJ about seven years ago, and Dr Paul
Samuelson was also speaking. And during his speech, he described the great
difficulty they had trying to get the economy to respond to ANY type of fiscal
stimulus, as well as the printing of huge amounts of 'dollars.' His statements
boil down to one phrase: At some point, deflation is almost impossible to
turn--It's like pushing on a piece of limp string. The economy just doesn't
respond. He was on the shadow open market committee during the 1930's...
I've had my stint as an economist and I'll leave that job to someone else. But I
hope people that are reading your series take the time to think for themselves.
You've presented some interesting views, but unfortunately, you've presented
them as if they are fact and written in stone. They may be your views. They may
be right or wrong. But in many of the things you have written about here, the
way things unfold will not be dictated by anyone's opinion. And that's why there
is a market place.
Best,
Tim Morge
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