Printing Money

["LYNN TURGEON, PROFESSOR EMERITUS OF ECONOMICS, HOFSTRA UNIVERSITY, ECOELT@xxxxxxxxxxxxxxxx" <ECOELT@xxxxxxxxxxxxxxxx>]

Dear Barkley, You may be interested in the following letter sent to the NYT on
February 7:
	Thomas L. Friedman (Yeltsin's Economic Chechnya" February 1m 1995),
writing from Davos, Switzerland, reflects conventional monetarist concerns
thatthe Russians have lost control of the money supply:that the 1995 Yeltsin
budget "is as phony as a rubber ruble, particularly its assumptions on
inflation and the deficit"; that portfolio investment has fallen from $500
million inJuly to $20 million in Decemer.
	In the process of moving from a notorious seller's market to a typical
capitalist kbuyer'smarket in a very short peri9od of time, Russianmonetary
authorities have cut the REAL money supply by 80 %. Inmy view, the real money
supply has been cut too much and too rapidly.  At any rate, Russians should
realize that even Alan Greenspan no longer considers changes in the money
supply to be a reliable predictor ofinflation.
	Likewise, the Reagan Administration proved that the budget deficit may
have very little to do withinflation.  The tripling ofour national debt over
eight years was accompanied by a taming of inflation.  Theinflatiion recorced
by Russian governmentk price indexes reflects principally the rise in the price
of Russian imports asmonetary speculators increasetheirholdings of dollars as
the Russianeconomy becomes more "dollarized."  The depreciation ofthe exchange
value of the ruble by over 50  percent in less than ayear increases the selling
price ofk these kimports which are flooding the Russianmarket and pushingup
price indexes.
	The recent collapseof the Mexican peso should convince the Russians
that portfolio investment is particularly fickle and should be avoided. The
Bretton Woods Commission headed by Paul Volcker recommended a return tofixed
rates of exchange similar tothe situation before Nixon and Connally closed the
goldwindow in August, 1971. In my non-monetarist view, fixed rates are morek
appropriatethanthe "dirty float" whichencourages the transfer of k"hotmoney"
and allows the George Soros's of this iworld to enrich themselvesk by playing
offone curren y against the other.
	I would hope that Friedman's recommendation tha t the IMF blackmail
Yeltsin into following their monetairist advice would fall on deaf ears and
that Russian policy makers begin adopting non-monetaist policies designed to
get underutilized capacity working again, thereby reducing supply-side
inflation which seemsk to be the realkculprit.  Lynn Turgeon

	Some recent info on farmer's market prices in Kostroma for first weekin
February show no net kchange in inflation the first week in February. If you
can avoid imported products, you can avoid inflation.
	I liked Jim's postingon the creation of money. But does anyone know the
origin and rationale for the kprintingjof Treasury notes in 1963? They are
still circulating, including a $2 bill.
	Also does kanyone know about a series on changes in the real money
supply since World War  II in the United States?  My impression is that it has
grown more slowly than real GNP.  At least this was the case in the 1970s.
	Gunnar Myrdal oncek proposed taking currency up in an azirplane and
tossing it overboard.  Those from lower income classes would be more inclined
ito pick it up and stimulate the economy. ECOELT@xxxxxxxxxxxxxxxx