Monday, August 9, 2010

Dedicated to young mr HPW!

Time to Re-think Milton Friedman?

.... and i wasnt even going to post it... aw well i must have got all emotional to do it. Whether in/de is correct balance is always good... IMHO. The in/deflation discussion still very much alive and nothing kicked in the gutter or anywhere else for that matter. "Most persistent and pernicious of the inflationists’ delusions is that the Federal Reserve can and will do “whatever it takes” to avoid deflation. But to believe that easing has not worked so far because the Fed has not eased enough is to imply that some further quantity of easing will do the trick. This kind of thinking, most notably by New York Times columnist Paul Krugman, is beyond dumb, but when it infects those on the left side of the Congressional aisle it can be downright dangerous. Tea Partiers to the rescue? "

Posted by techieman @ 03:59 PM (836 views)
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3 thoughts on “Dedicated to young mr HPW!

  • I’m no expert techie, but i think some central banks still believe that they themselves have the power to change the course of economic indicators in the short, medium and long run equally effectively and competently.

    I think they might do something in the short run, but after this – the market will work out an answer reflecting some sort of reality.

    If governments pile into more QE buy buying their own bonds denominated in their own currency, there comes a time when the price of risk will have to increase as people see that the policy simply does not work and want to insure against default. If they spend someone elses currency, there will be issues with sovereign states.

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  • Again, ‘Hyperinflation food shortages.’

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  • My take:

    All one needs to do is define what Milton Friedman meant by “monetary phenomenon” — in his infamous quote “inflation is always and everywhere a monetary phenomenon” — rather than this being the quantity of money it is the quantity, velocity and aggregate output (or, really, aggregate monetary sinking). Corporates holding excess cash, and putting off planned projects are then included as monetary phenomena (as they rightly should) and The Cambridge Cash-Balance Theory may be applied to show that it’s not simply a supply side phenomenon (although this would be the most tweak-able knob for a short term effect, especially with a central banking model [such as everywhere has]).

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