Quote:
"why is it "flawed logic" that the money supply has increased 30% over the last 24 mos? it's reality.
the affect of the increased m1 can be a problem if not resolved in the irght way. as recovery (please, please may we have recovery soon..) is seen in employment and production increases, the fed needs to react. if they don't, we'lll see the return of inflation."
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increasing the money supply in this example is taking money that is either borrowed or printed.
If borrowed, then it is not an increase in the money supply. If I take a home improvement loan for 100K then I have 100K to spend. But, I owe 100K plus interest and so the effect is to shrink my money supply.
If printed, then the money supply has been increased but inflation is the cost. The only way to avoid the inflation cost would be to retract the printed money (reduce the money supply) before the inflationary run occurs.