Re: causes of the depression

On 2008-05-04, The Trucker <mikcob@[EMAIL PROTECTED]
> wrote:
> On Sat, 03 May 2008 20:17:31 -0700, orangatang1 wrote:
>
>> On 2 May, 22:02, Ron Peterson <r...@[EMAIL PROTECTED]
> wrote:
>>> On May 2, 1:12 pm, orangata...@[EMAIL PROTECTED]
 wrote:
>>>
>>> > It has long been recognised that deflation is the main cause of
>>> > recessions and depressions.
>>>
>>> What causes deflation? And, how do you know that?
>>>
>>> --
>>>    Ron
>> 
>> Inflation is caused by increasing the amount of money in circulation.
>> Roughly speaking, if the amount of money in circulation doubles the
>> value of money halfs. So, if the fed creates a lot of new money
>> inflation increases.
>
> That is what would happen if the money is injected at the bottom --
wages
> or other injections at the consumer level.  But if the additional money
> does not pass through the hands of the dudes at the bottom, of it is
just
> injected at the top like right into the financial markets then it
quickly
> settles into the pockets of people who will not spend it.  It is simply
> dead money.

Both the above are gross simplifications but I
think the second case is also wrong. Trucker,
are you really trying to say that there is not
inflationary impact/effect when money is injected
via the capital markets?


jmh