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I would like to hear the supporting argenumts for a deflationary environment. Lot's of money in circulation = inflation. Little money in circulation = deflation.In the Japan bust, the govt. threw massive money at the problem and lowered the lending rate to nothing in hopes of getting the money flowing into the system. But instead of taking the money and lending it out, the banks put the money in safer ventures such as T-bills. Thus, inflation never took root.The U.S. is looking at the same problem. Let's say we throw mass money at banks in an effort to get them to lend. What is going to get them to lend that money to a guy coming in for a loan on a house that loses value before he gets the paper's signed? There are much safer ways to invest the money.The first idea I've heard yet that I've actually thought could work is the govt. buying into the top banks. It's a lot easier for one bank to trust loaning to another bank when they know the govt. has a heavy stake in the co. Personally, I'm against the idea, but if we are going to spend the money anyways, I'd rather see it go this way than some of the other stupid B.S. Paulson had planned.Thoughts? Rate this comment: 0 0
by Jony 11:58:38 PM 2012.12.08 |
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