Freedoms Truth

Bernanke and Obama's Advisors Are Wrong: Deflation Didn't Threaten the U.S. Economy

"The problem was not gold but the fractional reserve banking system."

In simplistic terms, its about that tiger called leverage. if you never have margin, you cant have a margin call; if you never have debt, you cant have a debt-induced bankruptcy; if you dont have credit ratios, you cant have credit contractions (when creditors fail) that induce panics, recessions and depressions.
Is that the point?

"No doubt some of you have still have doubts about the benefits of productivity-induced falling prices, particularly when so many economic commentators, including supply-siders, argue that a stable price level is necessary if recessions are to be avoided."

Any who dispute this: Let us know which depression was caused by the million-fold reduction in DRAM prices per bit since 1970. And I think supply-sider and technophile George Gilder for one would be on board that point btw. falling prices dont cause money contraction, that reverses cause and effect. Deflation like inflation is a monetary phenomenon and one, but not the only, source of falling prices. Another one - which we see since July 2008, is change in asset price due to supply and demand.

If Bernanke thinks the falling price of oil since july, by adding to 'deflation' , is a threat to our economy, lets fire him before he does more damage.

Bernanke and Obama's Advisors Are Wrong: Deflation Didn't Threaten the U.S. Economy

"Mr Obama has to take the advice of advisors, he can't know everything,
> especially on such intricate matters."

Obama will do nothing but peddle the liberal elite conventional wisdom as the 'thing to do'. That is why it is so frightening how wrong that liberal elite just at a moment when economic decisions will have great consequence.

The 'stimulus' bill is nothing but a trillion dollar boondoggle stuffed with all the Democrats' campaign promises. It's a fraud on the American people to call this spending bill a 'stimulus' - less than 3% of it is infrastructure, and less than 25% of it is real tax cuts, and none of them of the type (tax rate reductions) that spur growth. It will throw money at the liberals' favorite pet priorities, adding to programs already fully funded, bailout states from making sound fiscal decisions, yet do nothing for the economy.

Their TARP 'bailout' will now have enough strings to do more harm than good for banks, it will not revive lending (as if that is the right goal anyway), and will, at best, end up only a partial loss for taxpayers and another nothing for the economy, as banks slog through anyway. For every dollar the Govt put in, the private sector pulls out a dollar in fear. The Govt is simply (and thankfully) too small to replace an active risk-accepting private sector; thus, NO AMOUNT OF GOVT INTERVENTION CAN POSSIBLY WORK. Only reviving acceptance of risk in the private sector can work. And govt meddling only makes that worse. The crying shame here is that the systematic risk issues could have and should have been dealt deftly by Fed engagement in certain limited operations, eg., pre-pack BK for Lehman that kept all counterparty risks at bay and kept debtholders in better shape . In fact, you see some of that now; with the fed selling treasuries and using it to buy commercial paper; this is another way of offloading risk from the risk-fearing market. yet the Fed will make money on these transactions.

The best we've got to shake up the economy is the 0% interest rate, and that's a sure fire 'enjoy now pay later' deal for the monetary system.

This is Keynesianism on crack. The only thing that has me thinking this wont end badly is that the economy has an underlying strength and capability that will come through, the recession wil end and we will grow again in 2010, but it wont be for lack of trying by the Democrats to hobble it.