Thinking the Unthinkable: The Threat of the Irish [View article]
John - - -
Great article with a balanced presentation. You could not have quoted a better student of the business cycle than Eichengreen.
Nouriel Roubini is urging an ECB policy to be more like the U.S. policy - push liquidity, not austerity. (econintersect.com/b2ev...) Is it possible to stay in the middle? Is it really a choice between a deflationary spiral and inflating another bubble? I can't answer that and I am still looking for someone who presents a good argument.
It seems that the system design that has evolved from Jekyl Island is one that uses inflation (some of the time controlled) to create growth that is part real growth and part illusion (the inflation part). Inflation on target (often around 3%) is slow enough that real growth of 3% is perceived by the populace as 6% (the nominal growth) and allows the inflation to be accepted by the masses.
The bigger problem comes into play when the real growth drops to 2% and below while inflation continues at the same average pace. The solution of the populace? Increase debt and credit use to maintain the life style to which they have become accustomed. When the debt and credit becomes under priced, which it has been for much of the past 10-15 years, devastating bubbles can occur. The policy still seems to be to try rescue by creating another bubble.
It is interesting to note that there is a correlation between increased use of credit and debt by the citizenry and the concentration of wealth by the few. I should not blatantly assume cause and effect but I want to at least be suspicious about that. Credit is the new tool of lords (finance) to subjugate the serfs, just as concentrated land ownership was the tool for feudalism before the industrial revolution. (See an interesting discussion of the "New Fuedalism" by Derryl Hermanutz econintersect.com/word....)
I'll repeat, the only alternative plan seems to be austerity and the deflationary spiral which you discuss.
Is there no middle ground?
Again, an outstanding, even more penetrating than usual.
Thinking the Unthinkable: The Threat of the Irish [View article]
Great article with a balanced presentation. You could not have quoted a better student of the business cycle than Eichengreen.
Nouriel Roubini is urging an ECB policy to be more like the U.S. policy - push liquidity, not austerity. (econintersect.com/b2ev...) Is it possible to stay in the middle? Is it really a choice between a deflationary spiral and inflating another bubble? I can't answer that and I am still looking for someone who presents a good argument.
It seems that the system design that has evolved from Jekyl Island is one that uses inflation (some of the time controlled) to create growth that is part real growth and part illusion (the inflation part). Inflation on target (often around 3%) is slow enough that real growth of 3% is perceived by the populace as 6% (the nominal growth) and allows the inflation to be accepted by the masses.
The bigger problem comes into play when the real growth drops to 2% and below while inflation continues at the same average pace. The solution of the populace? Increase debt and credit use to maintain the life style to which they have become accustomed. When the debt and credit becomes under priced, which it has been for much of the past 10-15 years, devastating bubbles can occur. The policy still seems to be to try rescue by creating another bubble.
It is interesting to note that there is a correlation between increased use of credit and debt by the citizenry and the concentration of wealth by the few. I should not blatantly assume cause and effect but I want to at least be suspicious about that. Credit is the new tool of lords (finance) to subjugate the serfs, just as concentrated land ownership was the tool for feudalism before the industrial revolution. (See an interesting discussion of the "New Fuedalism" by Derryl Hermanutz econintersect.com/word....)
I'll repeat, the only alternative plan seems to be austerity and the deflationary spiral which you discuss.
Is there no middle ground?
Again, an outstanding, even more penetrating than usual.