Read my latest LRC article where I describe why targeting of official consumer price inflation, which is official dogma of most mayor central banks and after Ben Bernanke became Fed Chairman unofficial Fed dogma too, even if desirable (an assumption which can be challenged on many legitimate grounds, but which for now was assumed for the sake of the argument)is a futile endeavor since central banks have almost no influence on the consumer price inflation data they know about, while knowing virtually nothing about the consumer price inflation data they can influence, something which of course makes it impossible for central banks to achieve that target except by pure luck(or statistical manipulation).
A fact which is illustrated by the fact that in recent year Denmark have better achieved the 2% consumer price inflation target than Sweden -whose Riksbank officially targets a 2% consumer price inflation rate- even though Denmark doesn’t even attempt to achive it, as it instead pursues a fixed exchange rate policy versus the euro.
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I.e. central banks cannot know the future inflation rate so policy is always (except by accident) pro cyclical — however they can observe other leading inflation sensitive indicators.
A better argument is to realize discoordination occurs irrespective of “inflation” or “deflation” any time credit is increased by fraudulent methods (i.e. short money made into long dated credit). If productive increases grow an economy by 5% and the authorities increase reserves enough so that credit grows by 10%, clearly there will be inflation in something (perhaps assets) and that will make that something overvalued relative to everthing else.
Of course if the economy grows by 5% and the payment on the new credit extended grows more than 5%, as total credit exceeds the economy’s size we run into an “inflate or die” scenario.
I’d like to see a cogent plan for rolling this back. Rothbard’s “slash and burn” plan is a recipe for blowback communism. I think it would prove better if we have “competing currencies”, i.e. revoke the legal tender laws. Government money will be in demand to pay taxes, but it will have to compete with market moneys as a storage for savings.
I am glad that Ben B and his comrades are sooo much smarter than I and can divine exactly how long the economy takes to correct from their tinkering.
The sad part is from their behavior they have very little ideal of this as well.
The interesting part is that when they don’t know what is happening they just fudge the statistics and have a hord of idiots in congress and the white house who buy this crap.
I think it would prove better if we have “competing currencies”, i.e. revoke the legal tender laws.
I’d like to have legal tender laws revoked, but legal tender law doesn’t stop attempts at competing currencies. (There are two in the US today: American Liberty Dollar, Phoenix Dollar – maybe others I don’t know about)
Peter,
No doubt, but try remitting 3 chickens and a Hogshead of Ale to clear your slate with the Tax Collector.
The way to deal with tax collectors is to hang them from the nearest suitable object. Try remitting three chickens and a hogshead of ale at your local supermarket. You can’t, but legal tender laws have nothing to do with it.
[Your best bet for competing currencies today: get a 1MDC account, go to icegold.com to fill it with gold, go to bestgoldcard.com and get a card, proceed to spend 1MDC gold anywhere you like]
Peter — it’s legal tender + capital gains tax that prevents competing currencies — cap gains would be a transaction tax if dollars depreciate against a firmer currency because you’d have to pay it every time you exchanged the currency for dollars to pay taxes …
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