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Discussion: (34 comments)

  1. You can’t compare past rates with current ones unless you use the same methodology. The units and methods have to be the same if you are to avoid the orange to apple comparison that has been mentioned several times by commentators on Perry’s blog.

    1. Exactly. The rate would be just as high, if not higher, if we used the same CPI methodology as was used during the 1970s. http://www.cnbc.com/id/42551209

      Deflation — if by that Jim P. inaccurately means lower prices — is a good thing. Since when is it bad when goods and services become more affordable? He’s fallen into the Keynesian trap of thinking the government should drive up prices so wages supposedly also go up. But really this just drives up the cost of living and lowers Americans’ quality of life, to say nothing of our access to food and other inelastic goods/services.

      Milton Friedman suggested scrapping the Fed, as it was destroying the value of the dollar — something rarely mentioned when people quote him to push for more money printing.

      1. Todd Mason

        Wow. Deflationary psychology asks why buy it now when it will be cheaper next year? (Definitely bad for business.) It turns entrepreneurs cautious: If I borrow and expand will I get the prices I need to repay the loan? The dilemma of borrowing cheap dollars and repaying dear dollars becomes fact when workers’ pay is cut. It’s less tractable than inflationary psychology. Interest rates can always go higher. As Japan demonstrates 18 years later, O is as low as it goes.

        1. Inflation/deflation psychology is tied to leverage. Inflation benefits those who are highly leveraged and punishes those who are not.

          In the Depression of 1920-21 the US CPI dropped sharply, by some 30% plus. Nevertheless, when prices had fallen so sharply, Americans came out in droves and purchased bargains. (The US government also balanced its budget and paid little mind to the short, steep depression. Nor did it pay much mind to the recover.)

          But in 1920/21, households had very little debt and purchases “on credit” were more the exception than the rule. (Even mortgages were virtually unrecognizable from what we have today.)

          The expectation of inflation is in Americans’ mindset largely because Fed policy encourages it. We’ve become a far more productive economy than we were in the 1970′s and we should have been experiencing “good” deflation, the type that comes from greater productivity producing lower cost goods. Instead, we have higher cost goods and an expectation of inflation because the Fed’s official policy is to avoid deflation at nearly any cost.

          What the “inflationistas” fail to see, though, is that they are waging the same battle — using heroic artificial means — that a naturally occurring economy would have created holistically: a surge in demand.

          At the outset of a downturn, the Fed technicians fuel the engine with low interest rates and easy money, the holistic neighborhood mechanic says, “Let it be. Let bankruptcies occur and let their capital be reallocated to others. Prices will drop because there is no demand, people will fear for their jobs, and prices will drop until — ultimately — the flywheel catches and the engiine turns over and jumps back to life.”

          But now we are well past the downturn. The car has been in the garage for nearly five years (and its the Japanese make for over 20.) The Fed technicians have flooded the carburator with too much gas in the form of debt. Now, there is so much debt that the only choice is to drain the gasoline by tightening the money supply, reallocating capital to efficient uses, and defaulting on debt obligations.

          1. I agreed with your comment — until the last paragraph. Then you took the case you nicely built and blew it apart. Debt is not the immediate issue!!! It’s unemployment!! Fix that and the economy’s engine will fire right up.

          2. Hi, Gene –

            There was no reply box for you (I guess this exceeds the maximum level), so I hope this finds you.

            I appreciate you agree with our comment, even if you disagreed with the portion about debt.

            The point we tried to make with respect to debt is that the Keynesian solution to depression is a “road of no return”. Once you start trying to reinvigorate the economy by the extraordinary means of Keynesian economics, and run up deficits its hard to go back to the holistic means of recovery — deflation and increased demand from lower prices.

            As to debt v. unemployment being the issue, the former is the instrument of the latter. We have chosen to safeguard creditors and encourage leverage rather letting than go bankrupt and reallocating their capital. We have hoped that “pushing on a string” with lower interest rates would fire up the economy by getting people to borrow and spend (and, incidentally, to figure out that any dollar saved was eroded by inflation and inflationary expectations) rather than holistically increasing demand by lower prices via deflation.

            So,while n both our minds the solution is reducing unemployment, it begs the the question of how to do so. Most would say it is by increasing aggregate demand. Keynesians say to do so either by increase spending by government or by tax cuts for the populace. But such means generally result in higher deficits and more costly goods and services, although the participants in the economy largely remain stable. Deflation, on the other hand, decimates the economy’s participants who are borrowers and creditors with a wave of bankruptcies, but ultimately fuels demand, reallocates capital, and rewards thrift.

        2. Wow. Deflationary psychology asks why buy it now when it will be cheaper next year?

          Computer prices have fallen for more than a decade. Are sales low becuase consumers expect more price deflation?

  2. If you need/want a good, you’ll buy it. Reduced prices only expands the base of people who are willing to say yes. “Deflationary psychology” only exists in an econ textbook.

    Entrepreneurs should be cautious. Imprudent borrowing is precisely what caused the tech bubble, the housing bubble, etc.

    1. Todd Mason

      http://www.reuters.com/article/2012/12/16/us-japan-election-deflation-idUSBRE8BF0IO20121216

      /snip/ Classical economics would argue that consumers should welcome deflation, because it increases their purchasing power, and that people only hunt for bargains in earnest when they worry that prices will rise.

      But in Japan’s case, data shows purchasing power has been falling faster than prices. Japan’s average earnings have fallen 12.2 percent since fiscal 1997, while a core measure of consumer prices – excluding food and energy – has fallen 6.8 percent.

      In addition, consumers have spent so many years worrying about incomes and job security that finding ways to spend less has become a habit.

      “Our finances will improve next year when my wife goes back to work, but we still plan to buy the cheapest goods we can find,” said Yuichi Kawakami, 43, a freelance graphic designer.

      “I worry about prices, because the economy isn’t doing well. We also need to save for expenses down the road.”
      /snip/

      Asset bubble. Stagnant wages. Difficult economy. Sound familiar?

      1. It’s not exactly true that Japan experienced deflation — if by that you mean decreasing prices. Japan lost a lot of equity capitalization, which the media for some reason has described as deflation. The purchasing power of the yen is weak specifically because of Japan’s almost indefinite policy of near-zero interest rates. None of this is worth emulating. What I’ve suggested is the Fed raise interest rates, suck the extra money out of circulation, strengthen the dollar, and focus on driving growth by lessening the cost of the state. This isn’t particularly radical or unusual advice.

  3. Todd Mason

    Yes, Japanese real estate and the Nikkei lost a lot of value, which is to say the prices of each declined sharply, if that’s what you mean by deflation. And what you are suggesting is the Great Depression 2.0, and it is radical, unusual and dumb.

    1. No, that is not the definition of deflation. So now every time the Dow dips analysts should say, “there’s that deflation again!”? That was my point. It’s been misreported. What Japan has done over the last 20 years is wrong in almost every way.

      You can call me dumb if you think that makes the case for more aggressive money printing convincing. Somehow I don’t imagine you’ll be winning too many new converts.

      1. You can call me dumb if you think that makes the case for more aggressive money printing convincing. Somehow I don’t imagine you’ll be winning too many new converts.

        Sadly, most people are ignorant of economics. AEI Commentators like James Pethokoukis and Mark Perry keep cheering on the central planners at the Fed as they imagine them capable of running the economy even as they argue that the government cannot run the economy. Many of the readers here are just as ignorant and are either monetarists or Keynesians. To them inflation is all about prices even as they forget to include all of the prices in their basket and ignore the fact that there is no way to assign the proper weighting to each category or product.

      2. Todd Mason

        Not calling you dumb. Just your ideas. The BoJ hasn’t been effective because it did too little too late. In consumer-driven economies, you can’t save your way to recovery because your thrift costs your neighbor his job. The Fed started printing money by buying Fannie and Freddie bonds as the investor of last resort. So, in your world, it is perfectly acceptable that houses can’t be sold except for cash or owner finance?

    2. Yes, Japanese real estate and the Nikkei lost a lot of value, which is to say the prices of each declined sharply, if that’s what you mean by deflation. And what you are suggesting is the Great Depression 2.0, and it is radical, unusual and dumb.

      When real estate is in a bubble and that bubble pops you do not have ‘deflation’. Japan’s general price levels did not really fall for years and when they did you were looking at something like 0.2% or so for a few quarters. The reason was obvious; the BoJ prevented the liquidation that was necessary to create a strong foundation for the economy.

      Inflation is not defined as the price change of some artificial basket of goods. It is defined as the change in the money supply. And on that front there is a lot of it in the US economy.

      What is lost on both sides of this debate is that Fed cannot direct where the money that it creates is going all of the time. So far it has been successful in propping up the bond market as it has kept rates artificially low. But that game cannot last very long because of the 0% ceiling for bond prices. Eventually the bubble will burst. And when it does the US will no longer be as relevant as it is today.

      1. Todd Mason

        Inflation is defined as an increase in prices, and as a decline in purchasing power. http://www.investopedia.com/terms/i/inflation.asp#axzz2MCQRE2BD

        Your attempt to conflate quantitative easing and inflation assumes that the Fed does nothing as the economy picks up. In fact, the Fed CAN SELL securities to remove liquidity just as easily as it BUYS securities to inject liquidity. Granted, that will be a tricky job given the amount of mortgage backed bonds it owns, but the alternative now is higher mortgage rates and fewer buyers in a market that needs sales to establish bottoms. You forget that the financial system was dead in the water in 2008 — no mortgages, no car loans, no commercial paper. What would housing prices look like if the norm was cash sales?

        1. As I mentioned earlier, the government has moved the goalposts on what exactly inflation is. Traditionally, inflation referred to an increase in the money supply. Today, it’s come to mean an increase in prices. People like me would argue that this is because the Fed wants to divert Americans’ attention from the actual quantity of money.

          On the origin of the term “inflation”: http://www.clevelandfed.org/research/Commentary/1997/1015.pdf

        2. Inflation is defined as an increase in prices, and as a decline in purchasing power. http://www.investopedia.com/terms/i/inflation.asp#axzz2MCQRE2BD

          That is one new informal definition that confuses the symptom with the cause. (This is nothing new because progressives have redefined the meaning of words like Liberal.)

          There are other definitions that reference the original meaning, which is what some of the people on this thread point to when debating the issue.

          http://www.thefreedictionary.com/inflation

          Like many of the people who argue against your position I prefer the definition that says that inflation is the increase in money supply that exceeds the corresponding demand for money.

          Your attempt to conflate quantitative easing and inflation assumes that the Fed does nothing as the economy picks up.

          Not at all. My position is that central planning does not work any better when it is done by the Fed than when it is done by other people. Effective economic calculations require price signals that can only come from a free market. That cannot happen when the Fed manipulates interest rates and markets.

          In fact, the Fed CAN SELL securities to remove liquidity just as easily as it BUYS securities to inject liquidity.

          I do not dispute the fact that the Fed can do many things. I simple point out that it is not very good at what it attempts to do. It cannot push buttons or pull levers in a way that can get the economy to do what the Fed governors want it to do. In fact, for the Fed to do what it wants it has to be good at recognising where the economy stands. But if you read the minutes you find that the Fed is often clueless.

          Granted, that will be a tricky job given the amount of mortgage backed bonds it owns, but the alternative now is higher mortgage rates and fewer buyers in a market that needs sales to establish bottoms.

          LOL…What is wrong with letting the market establish the bottoms? Didn’t you learn that central planning does not work and that the best economic systems are those in which the government and central banks meddle least?

          You forget that the financial system was dead in the water in 2008 — no mortgages, no car loans, no commercial paper. What would housing prices look like if the norm was cash sales?

          The economy would have contracted very sharply as the market liquidated lousy investments. The housing units would have remained but would be owned by those that could actually afford to pay a market price that was not manipulated by external forces. All those subsidized companies that waste resources would have gone bankrupt and their assets would wind up in the hands of investors who were better at allocating resources more effectively. With less waste the economy would have recovered and would grow as a sound base was established. All the Fed and Congress did was kick the can down the road and increased the risk of a greater collapse.

          Like I wrote above, the model to follow is Harding’s. Cut taxes. Cut spending. And let the market do its job.

          1. Todd Mason

            “The economy would have contracted very sharply as the market liquidated lousy investments. The housing units would have remained but would be owned by those that could actually afford to pay a market price that was not manipulated by external forces.”

            Which is an absurd assessment of the global meltdown in 2008. How many people had their wealth buried in their backyard? If your answer is “not many” then how many bushels of rutabagas do suppose one of those housing units would fetch?

            “What is wrong with letting the market establish the bottoms? Didn’t you learn that central planning does not work and that the best economic systems are those in which the government and central banks meddle least? ”

            Again, Looney Toons. After a shaky start in 1989, the Resolution Trust Corp. unloaded real estate from seized thrifts at a pace that put a floor under prices in a matter of a year or so. (I was there.) Let’s call that govt meddling that worked. FOUR YEARS later, housing markets are just now picking up, even after the Fed has done all it can to keep financing available and inexpensive. Let’s say that the present situation called for a bit more govt. meddling.

            Then there’s China, which has imposed taxes and hiked lending standards to the point that it has avoided a housing bubble. So far. But, at the seventh inning stretch, let’s call it central planning, 1; free markets, 0. The Chinese do. They scoff at the notion we have anything to teach them about economics.

          2. Which is an absurd assessment of the global meltdown in 2008. How many people had their wealth buried in their backyard? If your answer is “not many” then how many bushels of rutabagas do suppose one of those housing units would fetch?

            Whatever the market dictates. The stimulus was not designed to help people but to bail out the banks who had taken on leverage that is more appropriate to reckless hedge fund managers. You have not established that artificial supports for price levels of houses or anything else is a good thing. If it is better for me that computer prices fall by 70% why is it bad that I house prices fall to levels that make them affordable?

            Again, Looney Toons. After a shaky start in 1989, the Resolution Trust Corp. unloaded real estate from seized thrifts at a pace that put a floor under prices in a matter of a year or so. (I was there.) Let’s call that govt meddling that worked. FOUR YEARS later, housing markets are just now picking up, even after the Fed has done all it can to keep financing available and inexpensive. Let’s say that the present situation called for a bit more govt. meddling.

            Actually, the meddling never worked. It simply kicked the can down the road and showed bankers that they did not have to be prudent because they would always be bailed out. You have failed to notice that since the bailouts have become accepted we have had many more of them and the bubbles have gotten bigger and bigger. That is failure, not success.

            Then there’s China, which has imposed taxes and hiked lending standards to the point that it has avoided a housing bubble.

            Which China would that be? I have friends who have flats in Shanghai that go for more than the equivalent real estate sells for in Toronto. There is a huge bubble in China. There are even empty cities in some areas sitting right next to older cities that were perfectly fine for their inhabitants. Eventually the housing units will be used up but I doubt that the current owners will exit without taking some serious losses.

            Do not misinterpret me because I am not as negative on China as perhaps I should be. I actually stayed in one of those empty cities near the Burmese border more than 10 years ago. From what I have heard the place is doing all right today. But the problem with China is inflation. When I lived there in 1995 and 1996 I could have a nice lunch and a litre of beer for around $5. Today that is what I would pay for a cup of tea at a nice cafe.

            So far. But, at the seventh inning stretch, let’s call it central planning, 1; free markets, 0. The Chinese do. They scoff at the notion we have anything to teach them about economics.

            You are getting things backwards again. Your government is far more intrusive than the Chinese government. The Chinese do not have a central bureaucracy that governs the size of toilets that can be installed or demand that citizens stop using incandescent bulbs. The regulatory environment is far less burdensome and as long as you stay away from political issues you have far more freedom than you have in the US.

        3. James Ashby

          ” What would housing prices look like if the norm was cash sales? ”

          What would they look like if the nation had a gold dollar and everyone was an absolute land-homeowner? Would the standard of living be higher or lower? High land-house value is you absolutely own it, freedom from paying rent, not, as fiat-money supporters have long attempted, collecting rent. Nothing about legitimate housing costs justifies a nation of tenants.

      2. James Ashby

        ” change in the money supply. ”

        Fiat money is a drastic reduction in money’s value, no reason for it but robbery, it can’t be called what it is, fiat-money supporters call it the money supply and anything else. There’s no correct amount of robbery, one fiat dollar is too many, as certain to constantly lose value as zillions.

        1. I agree. That is why I oppose the legal tender laws and want to see competition for the Fed.

  4. Japan might be in a twenty year deflation cycle,but check their unemployment rates,and GDP over this time.I don’t understand talk of fear of inflation,hyper-inflation is what we had in the late seventies that sucks.A three or four percent CPI would help suck up all this excess liquidity & debt wouldn’t it.Depends on how we calculate inflation I guess,the EU counts gasoline,not sure if US does or not,we should .

    1. I don’t understand talk of fear of inflation, hyper-inflation is what we had in the late seventies that sucks.

      First, you did not have hyperinflation in the 1970s. Second, I am paying more than twice as much for gasoline, milk, cheese, bread, coffee, insurance, and many other essentials than I did twenty years ago. Even if we use your faulty definition of inflation, that would show that there is plenty of it. And when I went to the US in December I could not believe how much more you are paying for fresh vegetables than you used than ten years ago.

      1. Todd Mason

        Prices would double every 24 years at 3 percent inflation. That would be plenty of NORMAL inflation. Next time you visit the US, find an H Mart store. This Korean supermarket chain has very fresh vegetables at terrific prices because of its discriminating clientele. (High turnover = freshness at discount prices thanks to minimal waste.) Be prepared to share the aisles in the vegetable and fish departments with stockers. Happy to add to your knowledge base today.

        1. Prices would double every 24 years at 3 percent inflation. That would be plenty of NORMAL inflation.

          I am paying a lot more than double. And it is not NORMAL to have rising prices as productivity is growing. Would it have been normal to see computer prices go up by 3% a year in the past two decades? If we had used a hard currency we would have seen a major reduction in prices and the standard of living would have been much higher.

          Next time you visit the US, find an H Mart store…

          I visit many stores not because I care that much about the price but because I search in knowledge that cannot be obtained by looking at government reports or economic commentaries. The picture is very different from what you are bing told and inflation is NOT NORMAL. It is created by central banks and government meddling in the banking system.

          The problem is that money creation cannot keep going up because there will come a point where wages cannot keep up with the monetary inflation and at some point the rising debt levels cannot rise any longer. When that happens you will see debt deflation and the death of the currency. The problem for many people is that they assume that the effects will be linear and that they will get a heads up in time to restructure their holdings to protect their purchasing power. But history shows that is not what happens. The changes in trend are very violent and very few are ever capable of getting out of their positions without taking major losses. And it is never different this time.

  5. Todd Mason

    No cans were kicked in the Southwest. Nine of 10 Texas bank holding companies failed. Dunno how many thrifts went under. The FDIC came away thinking that that too big to fail had a corollary — too many to fail. The poor schmuck in El Paso, which experienced little of the oil and real estate bubble, had his loan called just like the rest of the girls. A conservatively run apartment building suddenly was competing with a building next door bought at 10 cents on the dollar. As today, it didn’t matter much how frugal you were personally. If you got transferred to San Diego, your choice was mail your keys to your lender or bring a check to closing.
    Maybe you have to experience the slash-and-burn economy that Vangel wants to realize that Schumpeter perhaps had something less in mind.
    My point on China was not regulation but central planning. Yes, the markets are much more effective at divining what consumers want and delivering it with value. Trouble is, markets have little ability to know when it has become too much of a good thing. As far as I know, tulipmania preceded central banks and fiat money by many centuries. Animal spirits are alive and well in China as you note. Happily, the Chinese govt is quite willing to take away the punch bowl. You and I agree that they are just as likely to screw it up (as is Caterpillar, the Catholic church, and the parade of doom n gloomers who followed the Club of Rome.) But to say that central banks aren’t needed, in fact are part of the problem, is nuts.

    1. Maybe you have to experience the slash-and-burn economy that Vangel wants to realize that Schumpeter perhaps had something less in mind.

      ‘Vangel’ is against the intervention that creates bubbles. In the absence of such intervention there would be no need to have the high taxes and bailouts that you seem to support. In a world where there is no top down planning and meddling by government bureaucrats people would be free to interact voluntarily as they saw fit.

      My point on China was not regulation but central planning.

      You have no clue what you are talking about. I worked for a government owned factory that stalled the planners in Beijing for two years until they got exactly what they wanted. When Beijing finally gave in the job was done in three months. And if you have been around Chinese factories you should know that the shots are called by the consumers, not the producers. Most of the factories do what they please to please their customers, not some bureaucrats at the capital. The planners follow the market, not lead it.

      Trouble is, markets have little ability to know when it has become too much of a good thing.

      LOL…You mean to tell me that some idiots in a planning department know more than the market? The minutes showed that Bernanke and the Fed governors were totally unaware of the crisis even as it was unfolding. If that is your idea of knowing what to do you are not nearly as smart as I thought that you were.

      As far as I know, tulipmania preceded central banks and fiat money by many centuries.

      You need to become more informed. “The price of tulips only served as a manifestation of the end result of a government policy that expanded the quantity of money and thus fostered an environment for speculation and malinvestment. This scenario has been played out over and over throughout history.”

      Animal spirits are alive and well in China as you note. Happily, the Chinese govt is quite willing to take away the punch bowl.

      Actually, it isn’t. The Chinese government has been encouraging the banks to make loans that they would rather not make. Why do you think that there are empty cities being built on credit?

      You and I agree that they are just as likely to screw it up (as is Caterpillar, the Catholic church, and the parade of doom n gloomers who followed the Club of Rome.) But to say that central banks aren’t needed, in fact are part of the problem, is nuts.

      No it isn’t. They are not needed. Canada did not have a central bank during the Great Depression but its banks did not fail. The US did have a central bank and it used its monopoly power to increase the supply of credit until it created a massive bubble that burst in 1929 and triggered the Great Depression. Many of the American banks wound up closing. Argentina was a very wealthy country until it got a central bank that enabled the government to grow huge. After that the currency became a joke and Argentina became a poor country. I would rather have competition than a government granted monopoly because things work better that way both in theory and in practice.

      1. Todd Mason

        Of course, the Austrian school has to explain away tulipmania to maintain its pretense that money supply is the be all and end all of economics. My view is that Mackay’s “Madness of Crowds” was spot on. Little damage outside the tulip trade, no leverage, relatively few players, most of them tulip professionals– these are not the marks of a systemic problem. Nobel laureate has devoted his career to explaining bubbles, as opposed to explaining them away. But I know you won’t read this because your mind is a half-inch wide. http://bigthink.com/videos/dissecting-the-bubbles

        No matter, if you like we can move on to the South Seas bubble, the Mississippi scandal, the railroad bubble in 19th century America. In fact, JP Morgan served as a defacto central banker in the multiple panics of the late 1800s.

        And, yes, there are animal spirits in China. http://realestate.msn.com/article.aspx?cp-documentid=23375372

        And, to the question of bubbles, my point on central planning is that it takes an entity removed from the crowd to recognize madness and act. Tom elliott doesn’t believe I can convince people that printing money at times is the right action. Happily I don’t have to as long as the hard-money types come off as wingnuts.

        1. Todd Mason

          That’s Nobel laureate and bubble expert Vernon Smith. My bad.

        2. Of course, the Austrian school has to explain away tulipmania to maintain its pretense that money supply is the be all and end all of economics. My view is that Mackay’s “Madness of Crowds” was spot on.

          Mackay did not look at the changes in the money supply. The Austrians did.

          Little damage outside the tulip trade, no leverage, relatively few players, most of them tulip professionals– these are not the marks of a systemic problem. Nobel laureate has devoted his career to explaining bubbles, as opposed to explaining them away. But I know you won’t read this because your mind is a half-inch wide. http://bigthink.com/videos/dissecting-the-bubbles

          Smith agrees with the Austrian view that credit expansion and money are at the core of most bubbles. In his full interview he states, “Home prices are way out of proportion to increase of other prices in the economy and this was entirely due to funny money to basically home financing through credit much in excess of the kind of home buying that would normally occur out of income. “ This is perfectly in line with the explanation of the Austrians as would be expected in the work of someone who such a high regard for the Austrians.

          No matter, if you like we can move on to the South Seas bubble, the Mississippi scandal, the railroad bubble in 19th century America.

          All of those examples show the government meddling in the market and creating bubbles. None were the creation of an unhampered market.

          The South Sea Company was given a monopoly over South Seas trade routes by providing the government with an IOU for £10 million. The Mississippi bubble was created when the Duke of Orleans allowed John Law to merge the Banque General, which used gold deposits to issue paper money, to merge with the Mississippi Company and gave the Mississippi Company monopoly over all trade outside of Europe. The railway bubble was created when the government paid private railways for building track across the United States and gave them land and other priviliges even though James Hill was doing the same thing with his own money. The subsidized railways all went bust while Hill’s railway survived. It was finally bought out a few years ago by a Buffett owned railway.

          In fact, JP Morgan served as a defacto central banker in the multiple panics of the late 1800s.

          First, there was not central bank. Second, the government did allow special priviliges for the large banks in the US as it did for some of the larger industrial companies and the railways.

          And, yes, there are animal spirits in China. http://realestate.msn.com/article.aspx?cp-documentid=23375372

          Of course there is. The banks have increased credit at a very rapid rate and the money supply has been growing sharply. What do you expect when that happens?

          And, to the question of bubbles, my point on central planning is that it takes an entity removed from the crowd to recognize madness and act. Tom elliott doesn’t believe I can convince people that printing money at times is the right action. Happily I don’t have to as long as the hard-money types come off as wingnuts.

          I just showed you that the bubbles were in response to government meddling. In the absence of government meddling with the supply of money and credit there would not be many bubbles that caused much harm. You really need a better education because you seem to have everything backwards. Given the ignorance of economics no wonder you favour central planning.

  6. James Ashby

    ” Capital Hill Republicans grill Ben Bernanke ”

    A gold dollar ends the Federal Reserve, politicians’ only business, by unanimous consensus, is how to shrink government the most, the fastest …

  7. Todd Mason

    I have better things to do than play dueling links with an idiot. You say markets are never wrong and governments are never right. Happily most kindergartners are instructed on the wisdom of never saying never. I guess your mother was stuck on why one should not pick the wings off flies.

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