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Author: splotto Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35367  
Subject: Anti-Deflation Question Date: 5/8/2003 9:00 AM
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Hello:

Maybe someone here can shed light on this for me: I see is mentioned over and over that the FED®, in order to fight deflation (encourage inflation) would resort to buying treasuries.

Why would such action by them fight deflation? It seems that it would only drive up the prices of treasuries alone, not prices over all. I don't see it as pumping that much money into the system because that money is really already there.

I could see printing new money to increase the supply, thereby deflating the value of the dollar and inflating prices. But I fail to see how buying treasuries will do that. Can someone explain this to me?

Thanks,
Splotto
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