Sorry got called away there for a sec. I don'tthink you can say that easing credit doesn't increase economic activity also. You might want to argue by how much, but not simply whether it does or not. This would be clearer if the asset bubbles created recently by easy credit had caused the wealth they created to be spent on goods with more domestic content. The problem is, of course, the accumulation of debt that it entails. It is easy to see where that has gotten us. So there are real negatives, bubbles, debt accumulation, but easy credit will increase economic activity.

We might also want to makethe distinction between easy credit and expansive monetary policy. Which work hand in hand. But for instance businesses get very little of their capital from bank loans, but if the cost of capital is less they will be much more likely to make ceratin investment decisions. It all coming down to whether the return on that investment is better or worse than what one would get by parking the money, which becomes more attractive in a tight money scenario.