Zeev's Turnips Patch-No Politics (ZEEV)

[Elroy Jetson]

<<An economy with a stable money supply and improving productivity will experience deflation. This is both normal and desirable.>>

AG thinks not and I agree with him on this point. Once the idea that, "We can get it cheaper next year" is imbedded into the pubic consciousness, that economy is toast.

This erroneous idea is the precise cause of our many financial bubbles during the last decade. Neither you nor AG have learned from history. Expanding the money supply during deflationary periods stabilizes prices while leading to bubbles.

As Charles Rist, the Governor of the Bank of France pointed out, "A policy aiming at monetary stability will secure a relative stability of prices, but the economic history of the 1920's teaches us that a policy whose goal is stabilization of prices may result in inflation of money and credit, and very unsound speculation.

Not one single monetarist can explain the cause of the appearance of these financial bubbles. In order to do so they would have to recognize the fatal flaw inherent in their cult of money expansion.