When at first printing money doesn't succeed, should Fed really try again?
Now鈥ack to our miserable beat鈥ack to lies and vanity and foolishness. Back to the financial world!
If you could really make a society prosperous just by inflating the currency, Zimbabwe would be richer than Switzerland鈥nd the Argentines would all be driving Mercedes. They鈥檝e got 25% inflation right now. But they鈥檙e not getting rich. They鈥檙e not driving Mercedes. They鈥檙e just looking for ways not to get robbed, by buying apartments and opening offshore bank accounts.
And yet, everyone seems ready to believe that monetary inflation will make things better. Even the most illustrious thinkers in the financial world.
Here is George Soros, in The Financial Times:
鈥淲丑补迟 America needs is stimulus鈥︹��
鈥淲ithout a bailout,鈥� he says, re-treading some familiar ground, 鈥渢he financial system would have remained paralyzed.鈥�
Really? What makes him think so? It looks to us as if the bailouts themselves are the source of the paralysis. Rather than let the chips fall where they may, the bailouts left the chips more or less where they were. Failed bankers still run failed banks. Failed auto executives still run failed automakers. Failed regulators and policymakers regulate even more鈥nd as for making policy鈥ell, we now have QE!
Printing up extra money 鈥� with no backing 鈥� used to be the sort of thing only counterfeiters did. Now it is done by the central bankers and Treasury Secretaries themselves. They don鈥檛 apologize for it. They don鈥檛 hang their heads and contemplate blowing their brains out. Instead, they鈥檙e proud of it鈥nnouncing that they 鈥渟aved civilization,鈥� or some such claptrap.
It is all so amazing鈥t leaves us gasping for air鈥� Everyone seems to think he knows better what people should do with their money than the people who own it. Businesses are building up liquidity, says Soros; they should invest. Consumers are paying down debt; they should spend, says Krugman.
What? They don鈥檛 want to spend or invest? Then, we鈥檒l steal the money from them, via inflation, and make them want to get rid of it.
This makes no sense in theory. Why should people do anything with their money other than what they want to? What is an economy for, if not to serve the interests of the people in it?
But the economic busybodies think they know better. They think an economy is supposed serve them 鈥� by doing as they demand. They want it to produce full employment, consumer price increases and positive GDP numbers 鈥� all the time. And they think they can get these things by increasing the supply of notional 鈥渕oney.鈥�
It is swamp gas in theory鈥ut maybe it works in practice? But where is the evidence? When has it ever worked?
It hasn鈥檛. It never will.
But it sure can touch off a fire-show in the market鈥efore it blows up the economy completely.
Enjoy your weekend.
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