bobace

Waiting for the Death of the Chicago and Keynesian Schools

R eturn of the gold standard, as James Grant also prefers, is an admission that modern governments are not capable of regulating money supply. The current crisis was preceeded by a lack of regulation and over-sight. Adherence to a Gold Standard would not have any effect on the outcome - i.e., they are mutually exclusive concepts. I disagree with your opinion that the Keynesians will fail this time. I also disagree that the remedy is continued deleveraging of assets. (I agree that bad debts from insolvent debtors will need to be settled using the normal bankruptcy laws but this is normal course relief similar to the Resolution Trust liquidations in a prior Epoch.) The massive deficit financing and printing of money focused on retraining, public infrastructure and green initiatives, as Obama policy indicate, will increase consumer confidence and demand. Inflation will reduce real assets values - effective deleveraging. I base my view on the momentum of an Obama rally and a renewed focus on financial regulation and real-economy reorganization to reduce US reliance on foreign energy.