Re: drop in demand for US bonds

From: Ron Hardin (rhhardin_at_mindspring.com)
Date: 09/12/04 

Date: Sun, 12 Sep 2004 19:44:16 GMT

polar bear wrote:
> They can use the dollars to buy oil, iron ore, aluminum, nickel,
> copper, manganese, soybeans, jelly beans, whatever seems most important
> to them at the time.

They can buy from the US, and get out of dollars. But if it's not from the US,
they just shift the problem to the guy they gave the dollars to. The number of
dollars _somebody_ has to ``get out of'' does not decline until they're used for
a purchase from the US.

Only then does it compete with the domestic money supply, which is what constrains
the Fed from printing more to replace it. The Fed targets the proper domestic
money supply, not any particular number of dollars existing. 

-- 
Ron Hardin
rhhardin@mindspring.com
On the internet, nobody knows you're a jerk.