It's Not Whether You WIN Or Lose, But How You Play The
We all hope that Rin Tin Tin and the Inflation Fighters do WIN, but only those who believe in the efficacy of fighting fire with fire can reasonably hope that President Ford's plan will succeed. You don't fighl inflation by creating more of it.</br></br>Putting aside the good-intentioned exhortations to share your left-over Alpo with your neighborÛªs dog, the key words in Mr. Ford's speech were: ÛÏI have personally been assured by the chairman of the independent Federal Reserve Board that the supply of money and credit will expand sufficiently to meet the needs of our economy and that in no event will a credit crunch occur.Û</br></br>The credit crunch has occurred already, but; as the experience of the last years might have taught us, the crunch gels grittier when you continue to expand credit. WeÛªre entering into a period of nonproductive credit, that is people and businesses are now going to the bank to borrow to pay interest on the loans theyÛªve already made. By providing more credit at this juncture weÛªre turning ourselves into a nation of loan sharks, with each shark chomping on the tail of the shark in front of it and having its own tail chomped on by the shark in the rear.</br></br>Apparently nobody but the Far Right and a few octogenarian populists understands and appreciates the capacity of the Federal Reserve to create inflationary debt. It works this way. Suppose you have $1 in your bank account but you have a credit card. So you take yourself and a group of friends to a restaurant where</br></br>ÐÊ\ ft ri cry Earn morel i n p, left, Airs. Ford's nr; to social secretary, and Sheila It tilth TP'nirlenfold, her neiv /tress secretary. COMMENTARY, From B1 you spend $100 on dinner. Then suppose that, without your having paid them, the credit card company people make a loan for $100 using your debt as collateral. Two hundred dollars have been manufactured out of thin air and you and your friends have put the assets upon which this debt and/or money has been created in your bellies.