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<p>[QUOTE="SilverSurfer, post: 976561, member: 21603"]The head of the Fed doesn't agree with you.</p><p><br /></p><p>"</p><p>The Doctrine refers to measures that the Federal Reserve can use in conducting <a href="http://en.wikipedia.org/wiki/Monetary_policy" target="_blank" class="externalLink ProxyLink" data-proxy-href="http://en.wikipedia.org/wiki/Monetary_policy" rel="nofollow">monetary policy</a> to combat <a href="http://en.wikipedia.org/wiki/Deflation" target="_blank" class="externalLink ProxyLink" data-proxy-href="http://en.wikipedia.org/wiki/Deflation" rel="nofollow">deflation</a>. In 2002, when the word "deflation" began appearing in the business news, Bernanke gave a speech about deflation entitled "Deflation: Making Sure "It" Doesn't Happen Here."<a href="http://en.wikipedia.org/wiki/Bernanke_Doctrine#cite_note-speech-Nov2002-0" target="_blank" class="externalLink ProxyLink" data-proxy-href="http://en.wikipedia.org/wiki/Bernanke_Doctrine#cite_note-speech-Nov2002-0" rel="nofollow">[1]</a> In that speech, Bernanke states:<blockquote><p> <i>"The sources of deflation are not a mystery. Deflation is in almost all cases a side effect of a collapse of <a href="http://en.wikipedia.org/wiki/Aggregate_demand" target="_blank" class="externalLink ProxyLink" data-proxy-href="http://en.wikipedia.org/wiki/Aggregate_demand" rel="nofollow">aggregate demand</a>--a drop in spending so severe that producers must cut prices on an ongoing basis in order to find buyers. Likewise, the economic effects of a deflationary episode, for the most part, are similar to those of any other sharp decline in aggregate spending--namely, <a href="http://en.wikipedia.org/wiki/Recession" target="_blank" class="externalLink ProxyLink" data-proxy-href="http://en.wikipedia.org/wiki/Recession" rel="nofollow">recession</a>, rising <a href="http://en.wikipedia.org/wiki/Unemployment" target="_blank" class="externalLink ProxyLink" data-proxy-href="http://en.wikipedia.org/wiki/Unemployment" rel="nofollow">unemployment</a>, and financial stress."</i></p><p> </p></blockquote><p>He provides an assessment of the causes and effects of deflation in the modern economy. In order to combat deflation, Bernanke provides a prescription for the Federal Reserve to prevent it. He states that the government in a <u>fiat money</u> system owns the physical means of creating money. Control of the <u>means of production</u> for money implies that the government can always avoid deflation by simply issuing more money. He provides a seven specific measures that the Fed can use to prevent deflation."</p><p><br /></p><p><b>1) Increase the <a href="http://en.wikipedia.org/wiki/Money_supply" target="_blank" class="externalLink ProxyLink" data-proxy-href="http://en.wikipedia.org/wiki/Money_supply" rel="nofollow">money supply</a> (M1 and M2).</b></p><p> <blockquote><p> <i>"The U.S. government has a technology, called a printing press, that allows it to produce as many dollars as it wishes at essentially no cost." "Under a paper-money system, a determined government can always generate higher spending and, hence, positive inflation."</i></p><p> </p></blockquote><p>"</p><p><b>5) Depreciate the <a href="http://en.wikipedia.org/wiki/U.S._dollar" target="_blank" class="externalLink ProxyLink" data-proxy-href="http://en.wikipedia.org/wiki/U.S._dollar" rel="nofollow">U.S. dollar</a>.</b> Referring to U.S <a href="http://en.wikipedia.org/wiki/Monetary_Policy" target="_blank" class="externalLink ProxyLink" data-proxy-href="http://en.wikipedia.org/wiki/Monetary_Policy" rel="nofollow">Monetary Policy</a> in the 1930's under <a href="http://en.wikipedia.org/wiki/Franklin_Roosevelt" target="_blank" class="externalLink ProxyLink" data-proxy-href="http://en.wikipedia.org/wiki/Franklin_Roosevelt" rel="nofollow">Franklin Roosevelt</a>, he states that:<blockquote><p> <i>"This devaluation and the rapid increase in money supply ... ended the U.S. deflation remarkably quickly."</i></p><p><br /></p><p> </p></blockquote><p>[/QUOTE]</p><p><br /></p>
[QUOTE="SilverSurfer, post: 976561, member: 21603"]The head of the Fed doesn't agree with you. " The Doctrine refers to measures that the Federal Reserve can use in conducting [URL="http://en.wikipedia.org/wiki/Monetary_policy"]monetary policy[/URL] to combat [URL="http://en.wikipedia.org/wiki/Deflation"]deflation[/URL]. In 2002, when the word "deflation" began appearing in the business news, Bernanke gave a speech about deflation entitled "Deflation: Making Sure "It" Doesn't Happen Here."[URL="http://en.wikipedia.org/wiki/Bernanke_Doctrine#cite_note-speech-Nov2002-0"][1][/URL] In that speech, Bernanke states:[INDENT] [I]"The sources of deflation are not a mystery. Deflation is in almost all cases a side effect of a collapse of [URL="http://en.wikipedia.org/wiki/Aggregate_demand"]aggregate demand[/URL]--a drop in spending so severe that producers must cut prices on an ongoing basis in order to find buyers. Likewise, the economic effects of a deflationary episode, for the most part, are similar to those of any other sharp decline in aggregate spending--namely, [URL="http://en.wikipedia.org/wiki/Recession"]recession[/URL], rising [URL="http://en.wikipedia.org/wiki/Unemployment"]unemployment[/URL], and financial stress."[/I] [/INDENT]He provides an assessment of the causes and effects of deflation in the modern economy. In order to combat deflation, Bernanke provides a prescription for the Federal Reserve to prevent it. He states that the government in a [U]fiat money[/U] system owns the physical means of creating money. Control of the [U]means of production[/U] for money implies that the government can always avoid deflation by simply issuing more money. He provides a seven specific measures that the Fed can use to prevent deflation." [B]1) Increase the [URL="http://en.wikipedia.org/wiki/Money_supply"]money supply[/URL] (M1 and M2).[/B] [INDENT] [I]"The U.S. government has a technology, called a printing press, that allows it to produce as many dollars as it wishes at essentially no cost." "Under a paper-money system, a determined government can always generate higher spending and, hence, positive inflation."[/I] [/INDENT] " [B]5) Depreciate the [URL="http://en.wikipedia.org/wiki/U.S._dollar"]U.S. dollar[/URL].[/B] Referring to U.S [URL="http://en.wikipedia.org/wiki/Monetary_Policy"]Monetary Policy[/URL] in the 1930's under [URL="http://en.wikipedia.org/wiki/Franklin_Roosevelt"]Franklin Roosevelt[/URL], he states that:[INDENT] [I]"This devaluation and the rapid increase in money supply ... ended the U.S. deflation remarkably quickly."[/I] [/INDENT][/QUOTE]
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