Re: The Macroeconomics of Credit Money
From: anon (me_at_privacy.net)
Date: 10/12/04
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Date: Tue, 12 Oct 2004 14:01:50 -0400
"William F Hummel" <wfhummel@comcast.net> wrote in message
news:jn2gm0p1djbmomhovht0qtl1leb89eq5ni@4ax.com...
> >now existence of the lender by itself cannot be the reason, but what is
> >it that the lender _did_ .
> >
> In fact it IS the existence of the lender of last resort that
> underlies the inflationary bias in a fiat money system. Recognizing
> that the Fed cannot allow a major lender to default on its liabilities
> because it could crash the entire payment system, large banks have
> generally fallen fall prey to the "moral hazard". Their lending has
> been more aggressive than under a gold-backed system.
>
> The unique ability of the Fed to issue credit without limit in a fiat
> money system allows it to act not only as the lender of last resort
> but also to run a more liberal monetary policy, which it has done
once to the author's recollection from econ 101 "inflation is excess money
chasing limited real goods and services", you had said it was econ 101,
and it was incorrect.
now you are saying the inflation is a result of "moral hazard". then you
say it is because of a "liberal monetary policy".
can you explain to a non-bank market participant (one who
deals with money, price of money and goods and services),
how a "liberal monetary policy" is different from the
explanation given by econ 101 ? What is it that the fed is liberal about?
isn't it the price of credit (or the short term interest rate)?
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