Oh, c’mon that’s tinfoil stuff.
Actually deflation would be far more catastrophic and is a far greater economic threat. There was news that the Consumer Price Index dropped by the largest amount since 1932.
The bottom line is that Bush, once again, has proven that he’s anything but a conservative. His statement about “sacrificing free market principles” to save the free market demonstrates how profoundly out-of-touch the man is.
I’ve no love for Barry O, but for cryin-out-loud, let’s kick this pig.
With all due respect, I would correct Mr. Bush.
…We abandoned free market principles quite some time ago (like when we forced banks to start handing out loans to people who couldn’t repay) and as a result many feel that we have to push further away from the “free market” to “save” the free market.
I’m not so sure that it’s a good idea. Politics is a notoriously short-term business…and numerous decisions made for short term benefit often result in major disaster down the road.
Markets tend to do best when we don’t screw with them.
…but when is the last time somebody got elected for promising to leave things alone?
Exactly… Politicians are not so much concerned with preventing bad things, as they are with preventing bad things on their watch.
…but when is the last time somebody got elected for promising to leave things alone?
I think you just summarized a huge part of the problem in the “fix the Republican party” thread.
Deflation isn’t a threat. The dollar has some strength right now purely because there is demand for them because everyone is liquid. There is lots of inflation going on now, and it is going to hurt us bad. What happens when short term interest rates go up, and all of a sudden we’re paying hundreds of billions of dollars a year on the national debt? We either default, or crank the presses harder than they’re running now.
Virtually every economist in the world disagrees with that statement.
The dollar just fell, but that’s not really the danger deflation really signifies.
Essentially demand falls to the point where goods are no longer worth what they cost to produce because people can no longer afford to buy them. Hence the largest drop in CPI since 1932…the last time we suffered from significant deflation.
Inflation by comparison is MUCH less of a concern.
Gunshot John, that’s simply not true.
"What deflation does is provide a disincentive to borrow and an incentive to use current savings for purposes of investment. It means a reward for well-capitalized companies and individuals—a good thing all around.
Now we get to the crux of the matter: the Great Depression. The assumption is that falling prices somehow caused the economy to crumble. In fact, it was the after-effects of the boom combined with massive government intervention that caused the depression. The only silver lining in the entire period of the 1930s was precisely the falling prices that made the dollar count for more. Falling prices (a falling cost of living) are what Murray Rothbard has described as the “great advantage” of recessions. If you can imagine the Great Depression without falling prices, you have conjured up an image that is far worse than the reality.
Ask yourself whether during economic downturns, you want your money to grow or shrink in value? If your future job security is in doubt, do you want to pay more or less for goods? If your savings are meager, do you want them to have more or less purchasing power in the future? If you answer these questions rationally, you can see that deflation is wonderful for everyone, and the saving grace of a period of economic contraction. Throughout the 19th century, prices fell in periods of economic growth, which is precisely what one might expect. This is all to the good. "
Llewellyn H. Rockwell, Jr. http://mises.org/article.aspx?Id=1241
"It is true that without further government intervention there would be a deflationary spiral. It is not true that this spiral would be bottomless and wipe out the economy. It would not be a mortal threat to the lives and the welfare of the general population. It destroys essentially those companies and industries that live a parasitical existence at the expense of the rest of the economy, and which owe their existence to our present fiat-money system. Even in the short run, therefore, deflation reduces our real incomes only within rather narrow limits. And it will clear the ground for very substantial growth rates in the medium and long run.
We should not be afraid of deflation. We should love it as much as our liberties."
Jörg Guido Hülsmann http://mises.org/story/3231
unless big daddy government keeps them alive.
If you say so.
Exactly. What the hell are we so afraid of? When you have cancer, you gotta cut it out. When you have a limb with gangrene, you gotta cut it off. It’s never pleasant, nobody likes pain. But trying to AVOID it infinitely in the sense that you avoid necessary treatment for the problem, eventually kills you.
The economy and country needs to “take its medicine” for the undisciplined borrow-and-spend binge, and the politically correct fiscal policies, that have put us in this condition. If we keep refusing to take our medicine, we will continue to weaken financially until we go into a slow, steady economic decline, if not an absolute and catastrophic economic crash. We need to let the economically unsound institutions and individuals fall–go bankrupt–in order to keep the ship of state and the economy from sinking. Our unwillingness to do that, and our attempt to “socialize” every individual loss and spread it out to the whole society, drags down everyone.
Funny, FDR thought the same thing about his New Deal and only prolonged the misery into 1943.
Good stuff, all of this.
…but when is the last time somebody got elected for promising to leave things alone?
Public fear of deregulation has to be accounted for, first. Change the irrational fear of deregulation, and leaving things the hell alone, and you’ll start to see real progress.
-B
We are just sliding into more socialism, and Obama will accelerate the slide.
The reason they have that fear is because “deregulation did it!” has been the democrat talking point.
The financial sector is in the trouble it’s in for a much simpler reason: They were handing out money to people who were a bad credit risk. Warnings about this were given repeatedly by Greenspan and others…and intellectual luminaries like Barney Frank told Greenspan he was off his rocker.
…yet Greenspan is gone and Frank is still in Congress.
The root cause here, of course, is the puzzling belief that government solves problems, particularly economic ones among the public. Government is damned good at creating problems (particularly when they try to “manage” the economy) but rarely has any useful ideas of how to solve them. This, of course, is lost on much of the public.
Gunshot John, I don’t deny that deflation can cause some issues, but what you said about virtually every economist in the world disagreeing with me is patently false. Keynesian economists would certainly agree with you, however economists who argue for a true free market(Rothbard, Mises, Rockwell, and YOUNG Greenspan to name a few) agree with me.
Historically when you inject huge amounts of cash into a system, inflation is the result. And even if deflation really were on the way, it’s not as terrible as our central bank would have us believe.
It’s not just the people at Mises who agree with me, I can send you papers from Cato fellows who will argue the same.
He may have warned us of the dangers, but he most certainly enabled it by taking the interest rates down to near nothing and leaving them for years. We would have had a recession early in this decade, but to avoid that they flooded the market with cheap cash…it was like leaving a kindergarten class alone with soda and candy…and warning them to not misbehave.
Greenspan openly acknowledges that as a nation we have an atrocious savings rate, and that this will really hurt us in the future, but refuses to admit that artificially low interest rates dissuade people/banks/companies from saving.
We as a nation are like heroin addicts. But rather than allow us to go through withdraw and get better, they simply decided to keep us high.
I can’t think of a single economist that thinks “deflation” isn’t something to be concerned about and no it certainly isn’t just Keynesians.
That the federal government is dropping interests rates to their lowest-rates ever and printing cash like there is no tomorrow, I’d say they’re far more concerned about deflation than inflation.
You may disagree but you can take it up with them.
Then you didn’t read my posts…I quoted two of them, and even provided links to the papers I lifted the quotes from.
You’re right, Bernanke and crew have been correct literally every time they’ve made a decision in the past couple of years, let’s take their strategy seriously and at face value.:rolleyes:
A perceived threat from deflation may be how they justify lowering the interest rates, but in reality they’re simply trying to keep this whole phony economy rolling by providing cheap cash. It’s a fundamentally unsound economy, Greenspan even talked about these very issues in “Gold and Economic Freedom.”
No I did look at them but Lew Rockwell doesn’t strike me as a reputable economist so I didn’t really read further.
You’re kidding yourself if you think deflation destabilizing currency is a good thing but you’re certainly free to do so.
I don’t think it’s a good thing, but it’s certainly better than rampant inflation.
I’ve done quite well since moving lots of my money into commodities and foreign currencies, I don’t expect the trend to last forever, but until we get some reasonable monetary policy I sure do. How much money have those who listened to “reputable economists” lost? Was Greenspan less than reputable in his youth?
Whatever his professional reputation in his youth, your distinction qualifies your original statement.