From the Daily Capitalist on the apparent desire of the Fed to print money until inflation kicks in, thus “reviving” the economy:
..These “modern” economists ignore the need to deleverage and the need for malinvested capital tied up in unprofitable ventures to be liquidated and then reinvest capital in new profitable ventures. They ignore inflation’s distortion of the economic function of the act of saving which gives false go signals to producers of higher order goods (goods that take a long time to make). They ignore the creation of a new boom-bust business cycle based on a papered over mirage of fake profits. They ignore the fact that once the inflation stops, the economy collapses again.
President Evans is a big QE guy and he has been writing a lot about it lately and he has a vote on the Fed’s policy decisions (member of FOMC). Mr. Evans favors a “targeted inflation rate” which means they will print money until they achieve their desired inflation target of about 2%. Oh, and here is the latest idea which various Fed economists have invented: the “inflation deficit.” What they mean is that they can create price inflation higher than 2% for a while because since we’ve had price inflation below the 2% target we can sort of average out to 2% inflation over time. Hey, you can never have enough inflation according to these guys…
…I hope you appreciate the 13% devaluation of the dollar by 2014…
Do read the whole article because this is really what they want to do. Grasp that: they want your money to become rapidly worth less in order for you to stop saving money and go on a spending spree…and if you can throw in a bit of borrowing at the same time, so much the better. This is the economic insanity we live under – a world in which hard work, savings and careful investment is set aside in favor of a “get rich quick” scheme of economic “pump priming”.
Take it as a given that they will try this – though not, of course, until after the election. And don’t think of it as some sort of weird conspiracy: its really no more than the financial bosses having been raised on Keynesian economics and not knowing any other way to act. They really think they’re going to get us out of this mess by being even more profligate and silly than we were getting in to the mess.
We can hope that a new GOP House (and, just perhaps, a GOP Senate) will be able to put the brakes on this, but the Federal Reserve is rather outside the control of Congress (and that is part of a conspiracy, of a sort: the banksters and bureaucrats never, ever wanted the people or their representatives to have a say in monetary policy); it would take legislative action to stop them, and that would take Obama’s consent. There is an outside chance we could get that consent, but it is likely that as any moves will come from the GOP, Obama will be easily convinced to reject it simply for that reason.
The end result of all this will be, as noted in the linked article, a return to the “stagflation” of the 1970’s – rapidly rising prices while unemployment skyrockets and interest rates go stratospheric. Everyone’s grand mother will tell you that there is no free lunch and no short cut to success…but our Keynesians are convinced of both things.
Its going to be a long, long year in 2011…
HAT TIP: Zero Hedge
UPDATE: The Brits figure it out.
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