Indeed, my reply covered several topics and I meant to post it higher up. But a B- is fine in my book ;)

Here's the problem with printing more money, along with another anecdote. Increasing the money supply will simply devalue the currency, increasing prices, otherwise known as inflation. When explorers from Spain set out to discover gold in the New World, they got much more than they bargained for, but they did find some gold to bring back. They didn't get quite what they wanted though. Gold was their currency, and by bringing back more gold, they simply increased the gold supply and caused devaluation of everyone's gold holdings, I.E. inflation. What happened? Spain didn't suddenly start producing more goods and services because of the gold they brought back - they just increased the supply of money.

The measure of our economic growth is Real GDP Growth. This is equal to Nominal GDP Growth minus inflation. Causing inflation will not help our economy, it will hurt it. The Fed wants inflation at nearly zero and will not do anything to raise it, for good reason.

In response to the question of what happens if the fed lowers interest rates to zero and there is still no increas in GDP, well, quite simply it is not going to happen unless, as I mentioned in my past post, our population stops expanding, and our technology stops increasing. These are the long-run determinants of economic growth and unless these both stop or go negative, any other fluctuation is simply the business cycle, which will naturally resolve itself. After a long enough period of recession, all the economy's excess capacity is absorbed, and we then have a capacity shortage. This spurs investment which knocks down unemplyment and starts us on a recovery.

And if you think for one second that I have figured any of this out for myself, you are dead wrong. Go to the link below for the excellent online course materials from my Principles of Macro class, and specifically check out Section 7, Business Cycles

posted by 128.138.22...

http://spot.colorado.edu/~kaplan/econ2020/econ2020.html

• OT: Economics ... Deflation worries, J, Sat, 14 Dec 2002 11:43:15
  • The supply of 'new' money does not necessarily..., Jon in Chicago, Tue, 17 Dec 2002 13:34:53
    • Oh, maybe better explained..., Jon in chicago, Tue, 17 Dec 2002 14:44:15
      • 1) I agree with what you're saying ..., J, Tue, 17 Dec 2002 15:19:52
        • Re: 1) I agree with what you're saying ..., Jon in Chicago, Tue, 17 Dec 2002 16:28:21
    • I don't understand reason for sarcasm, but ..., J, Tue, 17 Dec 2002 14:31:59
  • Some Misunderstandings....., Alex C, Sat, 14 Dec 2002 23:43:42
    • Nixon took dollar off of gold standard years ago., J, Sun, 15 Dec 2002 00:56:28
    • Re:J, you original q was about deflation?, Jon906, Sun, 15 Dec 2002 00:32:02
      • Alright ... there isn't a simple answer, but I did ..., J, Sun, 15 Dec 2002 01:33:20
      • Do you live in Ithaca, NY? Lovely part of country ..., J, Sun, 15 Dec 2002 01:05:48
      • thanks. it makes more sense now. n/m, J, Sun, 15 Dec 2002 00:52:16
  • Deflation worries>> VERY long, K-9, Sat, 14 Dec 2002 18:54:26
    • The word you are all looking for...and more... (LONG), Jeff Malin, Mon, 16 Dec 2002 22:19:16
      • Thank you... and... I hope "fiat" money is better than, K-9, Tue, 17 Dec 2002 14:42:52
      • You get a B-. Your answer was good, but it answered, J, Mon, 16 Dec 2002 23:23:19
        • What to do next, Jeff Malin, Wed, 18 Dec 2002 15:47:28 <-- Viewing This Message
    • O.K ..., J, Sat, 14 Dec 2002 21:13:56
      • Improving Economics Education, economic barometer, Wed, 2 May 2012 12:54:31
      • Re: O.K ..., K-9, Mon, 16 Dec 2002 13:56:04
  • Re: OT: Economics ... Deflation worries, Ed MA, Sat, 14 Dec 2002 15:32:56
  • Re: OT: Economics ... Deflation worries, bRAD, Sat, 14 Dec 2002 12:25:59
    • Re: Deflation_big problem., Jon906, Sat, 14 Dec 2002 13:27:11
      • So, why not print money?, J, Sat, 14 Dec 2002 14:14:54
        • OT: Economic theory worries.............., zeke, Sat, 14 Dec 2002 19:09:19
          • Deflation is created by too much of a good thing?, J, Sat, 14 Dec 2002 21:37:22
          • Zeke, question for you>, K-9, Sat, 14 Dec 2002 19:36:43
            • Higher Ed' opportunities in MA....., zeke, Sun, 15 Dec 2002 07:38:33
              • Zeke, thanks for the info, K-9, Mon, 16 Dec 2002 14:02:11
        • Re: So, why not print money?, Ian Glenday , Sat, 14 Dec 2002 16:51:20
          • Ian Ian Ian ... you should answer the casting call for, J, Sat, 14 Dec 2002 21:28:09
  • It's certainly hurt the used vehicle market..., b.flippo, Sat, 14 Dec 2002 12:23:49

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