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Speaking Truth to Monetary Power

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4est_4est_Gump

Run Forrest! RUN!
Joined
Sep 19, 2011
Posts
89,007
...

The general public has been led to believe that the economy is a giant number that goes up and down. It is thought to be the role of the monetary authority to push that number back up whenever it shows signs of falling. The only potential drawback to such a course of action, the public is told, is the risk of an increase in consumer prices, which is a chance our policymakers have traditionally been willing to take.

But the economy is not a giant number. It is a latticework of interlocking production processes that work in implicit cooperation with one another to produce the diverse array of goods we enjoy. This latticework comes together without the need for central direction. It is assembled with the aid of the price system to which the free market gives rise. Economic calculation, the profit-and-loss reckoning that a free price system makes possible for the entrepreneur, directs resources into their most value-productive uses, and constantly pushes the economy toward an outcome in which the ever-changing desires of consumers are satisfied in the most cost-effective way in terms of opportunities foregone.

“Monetary policy” introduces white noise and confusion into this spontaneous process, and distorts the pattern of resource allocation that would have occurred in its absence. Interest rates on the unhampered market coordinate production across time. When consumers want more of existing products right now, that’s what the market produces. When consumers prefer to save more of their income, the market accordingly gets to work on projects that will mature in the future, when consumers are once again prepared to spend.

Artificially low interest rates, brought about by the central bank, affect the profitability of different production projects differently. Projects that are farther removed in time from finished consumer goods are given artificial stimulus by this contrived lowering of interest rates. These projects, which seem profitable at the time they are begun, run into difficulties as the true saving and consumption preferences of the public are revealed and the real saving necessary to fund them does not materialize.

Thus the central bank’s intervention rearranges the structure of production into an unsustainable configuration. Entrepreneurs are misled into investing in projects that do not conform to the pattern of consumer demand. Projects are begun for which the complementary resources are not available in sufficient quantities. As it becomes clear that this apparent prosperity is built on sand, the monetary authority is tempted to increase the dose of monetary pumping and push interest rates still lower. Should they do so, they deform the economy even further, and increase the number of lines of production that can survive profitably only if the loose monetary policy continues.

This is what F.A. Hayek meant when he said of inflationary monetary policy that “its stimulus is due to the errors which it produces.” It stimulates activity, all right, but not the kind of activity consumers demand. The more artificial stimulus the Fed creates, the more artificial the economy itself becomes. Ever more production projects come to rely for their profitability not on whether they involve the employment of resources within the latticework of production in such a way as best to serve consumer preferences, but instead on whether the central bank continues to pump in cheap money. The more such interventions the Fed engages in, the larger the sector of the economy whose survival comes to depend on the continuation of those interventions, and the harder the system will crash when the central bank finally decides to scale back or discontinue its activities.

As Jim Grant observes, “My fear is that because interest rates are suppressed, therefore earnings are inflated. So when rates go up ... the hall of mirrors is shattered and we look at each other and see what actually is real rather than what the Fed wants us to believe.”

Meanwhile, the world’s central banks, and the financial journalists who enable them, act as if every right-thinking person knows that monetary central planning has been a tremendous success, and that only the grossly uninformed or the blindly ideological could dissent from this near-universal judgment.

...
Click to expand...
Llewellyn H. Rockwell Jr.
http://mises.org/daily/6760/Speaking-Truth-to-Monetary-Power
 
The economy, like politics, is local.


Yeah yeah yeah, global blather/village . . . whatever.


Mine's still waiting to turn the corner, but we're still scratchin' by.


Waiting for that bubblin' crude to Black Gold up when I miss the shot at some food. ;)
 
I heard the recent story about the Keystone pipeline and I love how they manage to emphasize the word "crude" when talking about what they'll be pumping through it.


"Heavy cruuuuuuuuuuuuuude . . . .:


Just makes you want to send out for some home-delivered EggaMuffins or something.
 
Wat_Tyler said:
I heard the recent story about the Keystone pipeline and I love how they manage to emphasize the word "crude" when talking about what they'll be pumping through it.


"Heavy cruuuuuuuuuuuuuude . . . .:


Just makes you want to send out for some home-delivered EggaMuffins or something.
Click to expand...

We don’t prevent pollution, we export it (along with our jobs).
A_J, the Stupid

;) ;)
 
*chuckle*


This curious phenomenon of a vaunting inflation occurring at the same time as a steep recession was simply not supposed to happen in the Keynesian view of the world. Economists had always known that either the economy is in a boom period, in which case prices are rising, or else the economy is in a recession or depression marked by high unemployment, in which case prices are falling. In the boom, the Keynesian government was supposed to "sop up excess purchasing power" by increasing taxes, according to the Keynesian prescription — that is, it was supposed to take spending out of the economy; in the recession, on the other hand, the government was supposed to increase its spending and its deficits, in order to pump spending into the economy. But if the economy should be in an inflation and a recession with heavy unemployment at the same time, what in the world was government supposed to do? How could it step on the economic accelerator and brake at the same time?
Murray N. Rothbard
 
Which is why coffee is still priced like its wholesale cost is what it was last year. The morons will pay this, so fuck them, we'll keep charging it.


Meanwhile, I'm still trying to figure the best way to market my "skillset" . . . assuming someone would actually read the resume.


Key words, accomplishments . . . malarky.


I have to stimulate the Mopar performance parts industry.
 
Marketing oneself seems to be a matter of a Clean Facebook record, but even a slightly tarnished profile is better than none at all.

;) ;)
 
I was hoping to see the tan lines on her feet.


I wonder how many Deprived Latinos, are being oppressed on some dank farm somewhere instead of being allowed to freedom to work on the Chingando Gringo sailboat.


There are barnacles to scrape!!!
 
Liberals are not going to read all those words and stuff.

Their econ 101 professor explained to them that real wealth comes from a handful of clever men at the Fed deciding how much money to print and 535 people deciding what worthy projects to spend it all on.

How could that possibly go wrong. After all...in the highly unlikely event that something goes wrong (most likely from greedy rich guys mucking about trying to steal excess profits from "the people") we can ALWAYS print more to fix it.
 
rosco rathbone said:
Blame the Confederacy. They should have stayed in. 38th Congress....
Click to expand...

Had to look that up..the reference went over my head.

Good point...Damn Yankees. (The tax and spend ones what that instigated The war of northern aggression...Not Uncle Ted's band.)

When you think about the map it is still the Yankees in cahoots with the Californicators telling the South what to do. If not for the Texicans, the promise of "The South shall RISE again" would seem a distant dream.
 
query said:
When you think about the map it is still the Yankees in cahoots with the Californicators telling the South what to do. If not for the Texicans, the promise of "The South shall RISE again" would seem a distant dream.
Click to expand...

Have you ever read "The Yankee Cowboy War" by Carl Ogelsby?
 
nope...but I shall.. I am bored with my current box-o-books.

Is it for, or agin'? (not that it matters.)

edit: WOW...that might take a bit to get it to me in the interlibrary-loan chain in the little library near me.

@$107 I don't think I'm buying THAT tome.

Apparently the ubiquitous "THEY" do not want that back in print. ~grin~

It sounds fascinating. Like one of those books that you like even when you don't agree with the author.

My last good read like that was Jeremy Scahill's "Blackwater - The Rise of the World's Most Powerful Mercenary Army."

I assumed, delving in, that I was going to disagree with a lot of the authors conclusions. Although to be fair, I am a bit of a reformed hawk, so I am more open-minded about these things than I would have been say, 10 years ago.

He fairly ably persuaded me. At least the first 3/4 of it. It sits unfinished on my nightstand. He started getting to detailed about who shot whom where and when and lost me. I don't know if he is going to draw conclusions in the last 1/4, or what I might think about that, but I think I see where he is going.

It was a nice Journalistic-ally sound treatment. Very little reveals author's bias overtly. It is a lost art-form.
 
Last edited:
query said:
nope...but I shall.. I am bored with my current box-o-books.

Is it for, or agin'? (not that it matters.)

edit: WOW...that might take a bit to get it to me in the interlibrary-loan chain in the little library near me.

@$107 I don't think I'm buying THAT tome.

Apparently the ubiquitous "THEY" do not want that back in print. ~grin~

It sounds fascinating. Like one of those books that you like even when you don't agree with the author.

My last good read like that was Jeremy Scahill's "Blackwater - The Rise of the World's Most Powerful Mercenary Army."

I assumed, delving in, that I was going to disagree with a lot of the authors conclusions. Although to be fair, I am a bit of a reformed hawk, so I am more open-minded about these things than I would have been say, 10 years ago.

He fairly ably persuaded me. At least the first 3/4 of it. It sits unfinished on my nightstand. He started getting to detailed about who shot whom where and when and lost me. I don't know if he is going to draw conclusions in the last 1/4, or what I might think about that, but I think I see where he is going.

It was a nice Journalistic-ally sound treatment. Very little reveals author's bias overtly. It is a lost art-form.
Click to expand...

You can read it on line, I think it's on one of the "deep politics" forums.
 
4est_4est_Gump said:
*chuckle*


This curious phenomenon of a vaunting inflation occurring at the same time as a steep recession was simply not supposed to happen in the Keynesian view of the world. Economists had always known that either the economy is in a boom period, in which case prices are rising, or else the economy is in a recession or depression marked by high unemployment, in which case prices are falling. In the boom, the Keynesian government was supposed to "sop up excess purchasing power" by increasing taxes, according to the Keynesian prescription — that is, it was supposed to take spending out of the economy; in the recession, on the other hand, the government was supposed to increase its spending and its deficits, in order to pump spending into the economy. But if the economy should be in an inflation and a recession with heavy unemployment at the same time, what in the world was government supposed to do? How could it step on the economic accelerator and brake at the same time?
Murray N. Rothbard
Click to expand...

A classic example of "Murphy's Law" in action;

"Anything that can go wrong will go wrong."

The Fed has flooded the financial markets with their "QE(x)" experiment in monetary manipulation. World grain reserves are down, the Baltic Dry Index is down. Ranchers have sold off their beef herds due to the drought conditions in CA. and TX. The Pork producers have been devastated by a porcine virus.

IF the funny money the Fed has flooded the financial market with ever trickles out into the general economy the American public is going to be treated to a round of inflation that would make the banana republics of South America green with envy.

Ishmael
 
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