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Group-
Would someone like to weigh in on the issue of
whether the Fed can prevent a Deflationary scenerio? This has to do
with
the velocity of money; or how fast money will be
spent once it is put into the economy. Will the printed money be
spent
at all; or would consumers use to it
further reduce debt? The contention is
that the government or the Fed can make the money available, but if consumers or business does not spend it, the result will be
Deflation anyway. I've read that while this statement is partially correct; it is not the case of the U.S. Japan
is the example used where Deflation has been ongoing now for about ten
years. However; it is said that Japan has a
couple of things going for it that helps them withstand Deflation
which the U.S. does not: consumer savings and little or no debt. As the theory
goes; the U.S. cannot take a Deflation which is why the Fed guy Bernanke says they will do whatever it takes to prevent that
economic scenerio from happening. The consequences of that action is simply stated as 'inflate or die' and the
result would be; well: a LOT of INFLATION. The
question is; does the Fed in fact possess the tools
and power to PREVENT A DEFLATIONARY
ECONOMY?
Thank you for any thoughts or
comments.
Chas
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