Why Monetary Easing Will Fail

By Alasdair Macleod – Re-Blogged From Gold Eagle

The major economies have slowed suddenly in the last two or three months, prompting a change of tack in the monetary policies of central banks. The same old tired, failing inflationist responses are being lined up, despite the evidence that monetary easing has never stopped a credit crisis developing. This article demonstrates why monetary policy is doomed by citing three reasons. There is the empirical evidence of money and credit continuing to grow regardless of interest rate changes, the evidence of Gibson’s paradox, and widespread ignorance in macroeconomic circles of the role of time preference.

The current state of play

The Fed’s rowing back on monetary tightening has rescued the world economy from the next credit crisis, or at least that’s the bullish message being churned out by brokers’ analysts and the media hacks that feed off them. It brings to mind Dr Johnson’s cynical observation about an acquaintance’s second marriage being the triumph of hope over experience.

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Debts, Bastiat And Modern Economics

By Alasdair Macleod – Re-Blogged From http://www.Silver-Phoenix500.com

There is a well-worn conundrum told about a stranger, who walks into the hotel in a remote, sleepy village in Mexico, and reserves a room for the night, paying 1,000 pesos in advance. The innkeeper rejoices at this unexpected turn of events, for the village is remote, few people have any reason to go there, and there is very little money. The innkeeper goes to the village butcher, to whom he owes 1,000 pesos, and discharges his debt. The butcher takes the 1,000 pesos and pays it to the farmer, who supplies him with his meat for which he owes the same amount. The farmer hands this money over to Maria, which he in turn owes for her services. Maria, who is the entertainment centre for the village’s men, then goes to the innkeeper and pays off her bar bill, incurred as a necessary expense of her business, and which, as you might have guessed amounts to 1,000 pesos.

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The Economic Pie Is Shrinking!

By Bill Holter – Re-Blogged From http://www.Gold-Eagle.com

No matter how you look at it, the global economic pie is shrinking.  One might be able to argue this is not so based on individual statistical reports issued by various nations.  The problem though is this, many reports do not line up with real world reports.  For instance, how can “retail sales” in the U.S. grow when retailer after retailer reports worse than expected and contracting sales?  The answer is what your own eyes, common sense and of course “individual companies” added together tell you.

On a broader scale, we are told the world is in recovery.  Never mind contraction in Europe or bogus reporting in the U.S., China and elsewhere, “we are in recovery dammit!”.  The best way to look at this fallacy for yourself to divine the truth is to look at trade.  Or better, “trade rates”.  I have mentioned this before, the Baltic dry index has been crashing and now is very close to where it was back in the late 1980’s.

http://www.zerohedge.com/news/2015-11-17/baltic-dry-index-crashes-near-record-low

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End Interest Rate Manipulation

cropped-bob-shapiro.jpg   By Bob Shapiro

Last week, the FED head, Janet Yellen, announced that they were keeping interest rates pegged to zero. They haven’t raised rates now for almost 10 years.

Keynesians grant the FED / Government the power to manipulate rates. But, even they must say that the ZIRP and long term suppression of Free Market rates of interest is Socialism in the US. For those readers who may not be aware, Socialism is wildly destructive of an Economy, and of Individual Freedom.

Since the FED ended their QE programs, they have reverted to buying US Treasuries almost entirely at the short end of the yield curve. Traditional Keynesian dogma calls for short rate manipulation to be used to suppress long rates indirectly.

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The Unseen Consequences of Zero-Interest-Rate Policy

By – Re-Blogged From http://www.mises.org

In a dynamic economy, an action not only triggers just one effect, but always an entire series of different consequences. While the cause of the first effect is easily recognizable, the other effects often occur only later and no such recognition occurs. Frédéric Bastiat described this phenomenon in 1850 in his ground-breaking essay “What Is Seen and What is Not Seen”:

In the economic sphere, an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them …

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The Problem Isn’t Overproduction — It’s Malinvestment.

By Patrick Barron – Re-Blogged From http://www.mises.org

Mr. Max Ehrendfreund, writing in the Washington Post’s Wonkblog, believes that he has discovered something new: that the world is producing too much and doesn’t know what to do with it. His solution, of course, is to confiscate the overproduced products, such as oil and cotton, from its rightful owners and give it to the people who need it. This phony problem and its statist solution goes back at least as far at the 1930’s socialist calls for “production for use” vs. the hated capitalist concept of “production for profit“.

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