Monday, Feb 09, 2009
Inflate your way out of debt
CNBC: US Inflation Could Hit 200%
The US risks being hit by Zimbabwe-style hyperinflation and there are signs that the world's biggest economy risks turning into a banana republic, Marc Faber, author of the Gloom, Doom & Boom report, told CNBC's "Asia Squawk Box."
Posted by gardeniadotnet @ 06:50 PM (504 views) Add Comment
5 Comments
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1. mountain goat said...
Too right, they all following the "Zimbabwe School of Economics"
This in the FT today
"Has anyone else noticed that the current crisis sheds light on one of the great controversies of economic history?
A central theme of Keynes’s General Theory was the impotence of monetary policy in depression-type conditions. But Milton Friedman and Anna Schwartz, in their magisterial monetary history of the United States, claimed that the Fed could have prevented the Great Depression - a claim that in later, popular writings, including those of Friedman himself, was transmuted into the claim that the Fed caused the Depression.
Specifically, the theory goes, the Great Depression could have been avoided had the Fed moved quickly and aggresively to expand the monetary base.
That arguably, is what the US and others are doing now - via quantitative easing. And now, as Krugman puts it:
So here we are, facing a new crisis reminiscent of the 1930s. And this time the Fed has been spectacularly aggressive about expanding the monetary base.
And guess what - it doesn’t seem to be working.
I think the thesis of the Monetary History has just taken a hit"
2. mountain goat said...
Bond market collapsing...
source
3. Alphabetzoo said...
http://www.housepricecrash.co.uk/newsblog/2009/02/blog-great-explanation-of-why-the-pessimists-are-right-21555.php
Need a lot more printing of money to get inflation.
4. inflation is eating my savings said...
MG- I've only read coffee table JK Galbraith- not the momentous JM Keynes. You get the drift. Anyway, I think Galbraith's debunking of monetary policy in the depression and early 70s was flawed. It could be felt from his argument (although he did not explicity state it) that had it been used by the right people that it might have worked. So, I'm not sure.
What Galbraith does whitter (sorry did whitter) on about was the need not take take the narrow view. So the various stimuli may not have created a return to 2007 lending levels, but perhaps it prevented something bad happening. Perhaps I'm just naive. Banks failing is not good for savers. Most of the people here are savers, I suspect. Most of the people in the UK are savers.
5. bellwether said...
Bernanke it seems believes that expansion of fiat money (base money supply) will cause a 10/20 fold increase of credit money ie a bit like seed capital encoraging the banks to extend credit many times over.
To this end Bernanke has doubled base money supply in 4 months. This article (posted a day or so ago on here) argues that credit money does not follow base money (but the other way round) and that the policy is doomed to fail. The fed could resort to outright printing of money but this would mean increasing base money supply many many times over - author reckons 25x to even begin to replace the collapse in credit money.
An excellent read
http://www.nakedcapitalism.com/2009/02/steve-keen-roving-cavaliers-of-credit.html