[A-List] RE: Sabri's questions
Henry C.K. Liu
hliu at mindspring.com
Fri Aug 27 09:20:36 MDT 2004
Sabri Oncu wrote:
> > Whether an economy grows or declines depends on many factors,
> > monetary policy is only one factor.
> True. As some Turkish members of this list know, I keep saying the
> same elsewhere.
> However, what I had in mind was the creation of money to increase the
> incomes of the citizens so that they can consume more, meaning they
> can eat well, have decent housing, send their kids to school, take
> vacations every once in a while and the like. If this is the
> motivation behind money creation, it will inevitably lead to
> increased demand for many goods and services. Like, for example,
> there might not be enough meat since those school teachers who
> previously did not have enough income to buy meat now can buy meat.
> But unless the supply of meat is also increased, wouldn't the price
> of meat take off?
Sovereiign credit cannot be used beenficially merely to stimulate idle
demand. It must also stimulate efficient supply. But since we are in an
economic phase where there is over supply and insufficient demand cuased
mostly by wages being too low, there sovereign crfedit to stimulate
higher wage levels would be beneficial. When the price of beef tsakes
off, there will be more beef produced to capture the new price. Price
deflation now is due mostly to lack of demand which in turn is due to
low wages. There are exceptions in some sectors. Luxury cars, such as
Ferraris, have a two year waiting list, that id because the high income
earners have too much money.
> Hence, my question about the limits to the amount of money the
> government can create.
> Therefore, you and I are in agreement. It is not sufficient to create
> money to feed people. You need to do "other things" too.
> On another note, are you suggesting that there should be no
> international trade or am I misreading you?
No, I am not against international trade, only international trade
denominated in foreign currencies, particularly the dollar as a third
party currency. I am aslo against foreign trade being elevated to be
the whole economy rather than left in its proper place as one sector of
the economy. If foreign trade causes a reduction of domestic services,
such as education, health care, etc, then foreign trade should be
reduced. Exports should only be sold in the currency of the exporter
and imports can then be sold in the currency of the importer. Those who
do not export, cannot import. There willl be no trade surpluses or
> Like, I like Chinese noodles, French wine, even Cuban cigars every
> now and then, and the like.
Then you will have to try to produce things some Chinese or French or
Cubans want in excfhange, and not US Treasuries.
Henry C.K. Liu
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