Indulge me, I promise it's worth it.
I know I've had a penchant for going a little off topic but I feel these issues are important. This article I read today is really worth reading in its entirety. The guy's name is Charles Hugh Smith and I know that sounds like a pretty right wing name but if I can read Krugman, then you can indulge me and read this article. It really gets to the heart of the matter about why our polictical elites prefer a policy of inflation over deflation.
Despite my hard money and laissez faire bias, I do believe that some regulation, policy, or law needs to be imposed to prevent the elites from running away with the piggy bank! I think that if you're a die hard liberal and believe in the rights of the majority then Hugh Smith's opinion piece is worth reading. He's able to articulate the difference between more desirable inflation that he calls 'organic' and the bad kind that I've been alluding to called the 'speculative'. He also alludes to what we discussed in the previous post about monetary policy being a blunt instrument and how policy needs to pick up the slack viz a vis chartering new banks if necessary. The deflationary bugaboo has been much ballyhooed by the very same financial elites that benefit from government bailouts. Yes the Great Depression was bad but that's why we now have unemployment insurance, and welfare. (not to mention Fannie, Freddie, Gov't Motors and Cash for Clunkers)
You Want Inflation?
Go ahead. It's worth it!
posted by Des @ 2/16/2011 04:52:00 PM
3 Comments:
Well that's 30mins of my life I'll never get back. The first 90% of his article is a good analysis of the current situation we already knew. Then at the end, his 3 point amateurish solution is laughable. As he admits, "Is this a wise or prudent policy? I don't know." Well, I do know that Keynesian policies have worked in the middle of the 20th century in many nations, and there are proven ways to do it. I'm not sure if Mr. Smith is right or left from this article but he certainly advocates a demand side stimulus (organic inflation) which what Keynes would have wanted.
I think Bernanke's Fed is stoking speculation in commodities and our investments in this club prove it.(although on a small scale)
The Treasury and Fed have wasted precious capital and time trying to prop up the ruling elite bankers, and I thought the article summed it up nicely.
Demand side stimulus requires capital and savings and at zero percent interest rates, there is no savings - just junk spending and speculation. Fix the Fed and use policy to get business to invest/spend. . Businesses will spend if there's profit to be made. Keynes called this 'animal spirits'. Big banks on the other hand, by their nature don't do counter cyclical very well.
I think we're positioned well in Ag, Au, and free $$ (RY). Don't fight the Fed right?(even if I think they're wrong:)
One thing I will grant you, is that the Fed should not pursue QE3 unless and until the politicians have their fiscal policies set up to properly allocate the monetary easing. Current supply side policies clearly have not worked with QE1 and QE2, as they have only benefited a few elites, if you will.
So it seems we've come to a consensus from the left and the right.
Post a Comment
Subscribe to Post Comments [Atom]
<< Home