Jim: > Deregulation of finance is most central, along with the Fed's > unwillingness to warn against the development of a bubble economy.
That is fine! But with deregulation the financial system started to create huge amounts of money. Furthermore, whether the deflating asset prices are causing the decline in the money supply or the other way around is not the issue here. There is a feed back mechanism and each influences the other. I doubt that Central Banks and Governments can control the money supply even in the fiat system where there is a very complex banking system. Even in the fiat system, money is endogenously determined. There are no reserve requirements on any accounts other than the checking accounts in the US, so banks (real or shadow) can create money indefinitely, at least, in the US. It is the financial transactions that determine most of the money supply. Of course, when this is the case, money can be destroyed beyond the control of Central Banks and Governments as well, at least, in countries similar to the US. The same thing is happening in the UK too, for example. Lastly, the decline in consumption is very recent. The consumption started to decline after the subprime mess of 2007. Prior to that it was driven by easy credit and did not decrease. And because the incomes were not increasing at the same rate the debt was increasing, the failure was obvious: what the financial system created was a Ponzi Scheme. They call it "leverage" in these days. To close, why did finance come to dominate the US economy and what led to deregulaton, whether there is any connection with these and the falling profit rates and decreasing investments were not issues that I even mentioned in my previous post. You need to start from somewhere and after all, this is an e-mail, not an academic article. Sabri _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
