From: tjdoran@watserv1.uwaterloo.ca (DORAN TJ - BIOLOGY)
Subject: Re: Bank of Canada and printing money.
Organization: University of Waterloo
Distribution: can
Date: Wed, 16 Dec 1992 03:12:41 GMT

In article <1992Dec14.203829.6973@alchemy.chem.utoronto.ca> golchowy@alchemy.chem.utoronto.ca (Gerald Olchowy) writes:
>In article <Bz9JIH.2JJ@watserv1.uwaterloo.ca> tjdoran@watserv1.uwaterloo.ca (DORAN TJ - BIOLOGY) writes:
>>
>>At this point, we must separate foreign and domestic debt. 
>>
>>As mentioned before on this topic, if you start printing bills to pay off 
>>foreign debt, the IMF will jump all over you. 
>>
>
>The IMF will jump all over can if it starts printing money
>irresponsibly period...money is money.  The effects of inflation
>on domestic and foreign debt is exactly the same...if Canada
                                                    ^^^^^^^^^
>adopts a policy of excessive inflation, the international community
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
>will step in.  A lot of our debt which foreign investors hold is
>denominated in Canadian currency.

But my point is that such a policy does not have to be inflationary.
>
>>But, Canada owes Canadians money, in the form of t-bills. Most t-bills are
>>owned by insurance firms, banks, etc. and are considered investments. Even
>>the part owned by private citizens is, to a large extent, considered investment.
>>
>>If the Federal gov't liquidated all t-bills right now, and the whole mess of
>>dollars was treated like 'found money' by its Canadian owners, the price level 
>>would go thru the roof as people rush out to buy VCR's, cars, peanut butter,
>>etc.
>>
>>But in most cases, the banks, insurance companies, as well as the small-time
>>private citizen investor would simply look to reinvest the money. Prices of 
>>stocks would probably go through the roof, but that will have little effect
>>on the average citizen, since such portfolio investment only concerns a small 
>>class of wealthy people.
>>
>
>Inflation hurts the poorest people the most, and the wealthiest people,
>who have real assets the least.
>
The CPI does not consider the price of stock in Coca-Cola, GM, etc. It
considers the price of goods of importance to everyday people. How is
my life going to be affected by an increase in investment prices?t

>>On top of this, the resulting investment in private enterprise could be the 
>>best thing ever to happen to our economy. Unemployment would probably fall.
>>
>
>Hyperinflation destroys economies...unemployment would sore, the social
>safety net would be ripped asunder.

Hyperinflation Does destroy economies, if it's allowed to happen...
>
>>The important thing is that the cost of production of goods figured in the 
>>price index would not rise (costs might actually fall, increasing profits).
>>Freed from interest payments on domestic debt, the gov't could turn its $8  
>>billion operating surplus to paying off the foreign debt.
>>
>
>Your economics are delusional....
>
>Gerald
>
I suppose if you close your mind tightly enough, anything could seem
delusional.

TJ


-- 
TJ Doran  	              |"There you stand like a duck in a thunderstorm
TJDORAN@watserv1.uwaterloo.ca | again... Aren't you ever going to understand?" 
                              |                         - W.A. Mozart
Newsgroups: can.politics