Re: causes of the depression

On 2008-05-04, The Trucker <mikcob@[EMAIL PROTECTED]
> wrote:
> On Sun, 04 May 2008 15:05:34 +0000, jmh wrote:
>
>> 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?

To which Trucker now seems to be arguing that
an injection of money into rich peoples pockets
is not justr dead money but in fact *DE*flationary.

> "flation" is a "degree".  Not black or white or yes
> or no.  Injection of money into the pockets of those
> who have all they need and no need to "invest" will
> cause less INflation (if any at all) than money injected
> into the pockets of those who will spend it.  It is the
> spending that bids up the prices that manifest "inflation".
> If there is less additional spending then there is less
> inflation.  The major problem with "trickle down" is that
> there is no reason for the holders of money to invest.
> They know that the common people will have no jobs and no
> money and there will be NO inflation.  The money held
> by the rich will get more "valuable" and they need not
> add to their pile of money to add to their actual wealth.

Can you cite any theory or empirical evidence
that sup****ts the rather surprising claim of
money injections actually producing deflation?

jmh

>