Dear Pen-econers
I am quite curious as to why the S&L bailout must cost
anything? It seems to me that when loans go bad what is really
happening is that money is destroyed from the economy; nevertheles
s
the assets are still in existence. If this is the case
why cant
the federal government simply monetize these loses completely and
never increase the debt or tax burden? If
I understand
as a macroeconomist
that if one prints too
much money and injects it into the economy too quickly inflation
may result. I say may becauase it seems to me that most inflation
in the country in the past 25 years has been more supply side
than excess money creation. But even if one accepts the argument
completely that too much money will bring about inflation
if
the money existed prior to the S&Ls going broke why would replacing
it cause inflation. Afterall
I NEVER heard anyone saying that
when the S&Ls went broke it was good because it would hold down
inflation.
If my logic is flawed please explain the flaw. If not
please explain why others are not talking this way.
Thank you
Loren Rice
The University of Science and Arts of Oklahoma
