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Source link: http://archive.mises.org/14162/ruling-without-a-believable-rationale/

Ruling Without a Believable Rationale

October 6, 2010 by

The head of the Chicago Fed calls for inflation (“much more accommodation than we’ve put in place” so that “that the amount of excess savings that is taking place relative to investment is lowered”). One hundred percent (so far as I can tell) of the 175 comments at the WSJ’s report blast him for fallacious and dangerous thinking. Are Fed officials the only people who don’t get it?


guard October 6, 2010 at 9:54 am

Comments like the above seem to still be coming from the perspective that big banks and government have everyone’s interests at heart and it is only out of ignorance or stupidity that they are shafting everyone else. Grow up.

Wildberry October 6, 2010 at 10:45 am

Exactly! These are not stupid people who just don’t see the light. These are intelligent, well-connected agents for powerful interests, which are furthered by an inflationary policy.
Krugman and his beneficiaries, for example are never going to stop promoting their view just because the Austrian model is better by every metric.
If you assume the above to be true, it changes from an academic issue to a political one, although both are important.

Phinn October 6, 2010 at 11:48 am

I never ascribe to stupidity that which is adequately explained by malice.

I also assume that people intend to cause results that are the natural and inevitable consequences of their actions.

The Kid Salami October 6, 2010 at 12:03 pm

Yes, rather like all the pop starts at those nauseating and increasingly common benefit gigs – the obvious and immediate consequence of participation is that that they get publicity and to strut around a stage being cheered as some kind of hero by confused economic ignoramuses, yet people tell me that really they’re doing it for cause XYZ. The number of “intelligent” people I know who buy into this shit is scary.

Silas Barta October 6, 2010 at 10:18 am

If God didn’t want 2% inflation like clockwork, why did He give us 12 tribes of Israel?

Think about it.

J. Murray October 6, 2010 at 10:20 am

I’ve thought about it and it still makes no sense.

Phinn October 6, 2010 at 10:22 am

Weren’t there 13?

Silas Barta October 6, 2010 at 10:46 am

Even better.

North October 6, 2010 at 11:36 am

Hi Good Friend,

I don’t get it either. Do you mean that he wanted more inflation, exponentially growing the number of Abraham’s descendants until they were as numerous as the stars? Or did you mean something else?

Old Hop October 6, 2010 at 12:13 pm

Doesn’t the Federal debt now exceed the number of stars in the Milky Way galaxy? At least, more stars than Abraham could count….

Silas Barta October 6, 2010 at 1:03 pm

I mean that the rationales given for Fed decisions or its inflationary, anti-reality policies are really, really bizarre.

J. Murray October 6, 2010 at 1:15 pm

Oh, I get it. You’re wrong though, everyone knows they call up the Psychic Hotline and pay the $1.99 for the first minute and $0.99 for each additional minute to get monetary policy.

North October 6, 2010 at 5:32 pm

Good point. I agree, sometimes their justification is all over the place. The sleight of hand is what gets me (when they refuse to raise taxes but instead hit the printing presses)

North October 6, 2010 at 5:34 pm

good point Silas

Michael A. Clem October 7, 2010 at 10:16 am

What, they don’t read tea leaves anymore?

Shed Plant October 6, 2010 at 1:11 pm

It’s a deliberate non-sequitur made for the purposes of humour.

North October 6, 2010 at 7:53 pm

haha, I guess I really sucked the fun out of it by asking for an explanation :-)

Rick October 6, 2010 at 10:56 am

It’s amazing how much disregard the “masters of the universe” have for the civilian and freedom. People start voluntarily saving their money? A financial sorcerer like those at the Fed think it’s bad and works to undermine it.

It reminds me of reading the “Creature from Jekyll Island”. The stated goals are not the Federal Reserves private goals.

DayOwl October 6, 2010 at 11:55 am

This from the same institution whose representative said that we don’t have enough inflation for price stability. They’re depending on the diseducation system to make sure the majority doesn’t catch the contradiction.

“…[so] that the amount of excess savings that is taking place relative to investment is lowered.”

Translation: Too many parties are holding their money instead of letting us steal it, so we have to create more to make up the difference.

Cracker October 6, 2010 at 10:25 pm

That’s why I’m loading up on gold. I plan to make at least one more major purchase before the end of this year (and before the 1099 requirement kicks in).

Esuric October 7, 2010 at 12:23 am

The argument doesn’t make any sense. He’s essentially claiming that there is disequilibrium in the loanable funds market, where savings exceeds total investment. But this can only happen when market interest rates exceed the natural rate, which is hard to believe when the FFR is at .25%. I think he’s conflating savings with the demand for cash holdings. If he’s saying that we should expand the supply of money in order to satiate the elevated demand for cash holdings, then I would agree, but how would the Federal Reserve, a centrally planned organization, do this effectively? The question is rhetorical by the way.

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