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<p>[QUOTE=&quot;Cloudsweeper99, post: 759407, member: 3011&quot;]When the monetary base grows more slowly than manufacturing productivity increases, the effect is to increase the purchasing power of money.&nbsp; This means that the overall price level will gradually fall.&nbsp; Of course some goods will rise in price because of increased demand, and some will fall, but the total effect is a slight deflation that is good for the consumer and saver.</p><p><br /></p><p>Under most [maybe all] fiat currency regimes, the monetary base grows more quickly than manufacturing productivity increases.&nbsp; So the effect is to decrease the purchasing power of money.&nbsp; This means that the overall price level will graduall rise, equaling inflation.&nbsp; </p><p><br /></p><p>When you introduce central banking and permit them to control the monetary base, it creates a further complication in that the nominal GDP must continuously rise at a rate faster than average interest rates regardless of whether the economy is in recession or expansion.&nbsp; If they don&#039;t, it will lead to a deflationary depression even if manufacturing productivity is increasing.&nbsp; That&#039;s the battle that is taking place right now.&nbsp; Nominal GDP growth in the private sector is below the already low interest rates.&nbsp; The government is trying to correct the situation with deficit spending.&nbsp; Many writers will tell you that this won&#039;t work.&nbsp; My contacts tell me that it is experimental, but may very well work.&nbsp; It just hasn&#039;t been tried this way before.&nbsp; </p><p><br /></p><p>The difficulty with many of the simple answers that you find on the internet is that complex problems rarely have simple answers.&nbsp; And the internet writers who speak out against the Federal Reserve mean well, but have no appreciation of the tools and capabilities of the central bank.</p><p><br /></p><p>I would sum it up by saying that right now, the probability of success and failure is a coin flip.[/QUOTE]</p><p><br /></p>

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