Bloomberg has an interesting article on the financial systems’ laboratory experiment to reliquify itself.
Federal Reserve Chairman Ben S. Bernanke is siding with John Maynard Keynes against Milton Friedman by flooding the financial system with money.
If history is any guide, says Allan Meltzer, the effort will end in tears. Inflation “will get higher than it was in the 1970s,” says Meltzer, the Fed historian and professor of political economy at Carnegie Mellon University in Pittsburgh. At the end of that decade, consumer prices rose at a year-over- year rate of 13.3 percent.
Bernanke’s gamble that the highest jobless rate in 25 years and the most idle factory capacity on record will hold down inflation is straight out of the late British economist Keynes. Should late Nobel-prize-winner Friedman’s dictum that “inflation is always and everywhere a monetary phenomenon” prove right, the $1 trillion or more in liquidity Bernanke has pumped into the financial system by expanding the Fed’s balance sheet may leave him to cope with surging consumer prices.
So far, investors and economic data both back up the Bernanke-Keynes view. The market in Treasury Inflation-Protected Securities as of April 6 indicated long-term inflation expectations of 2.5 percent, below the 2.8 percent average inflation rate of the past 10 years.
20th century British economist John Maynard Keynes contended that aggregate demand for goods might be insufficient during economic crisis, leading to unnecessarily high unemployment and a significant reduction of output. According to Keynes’ views (currently adopted by Bernanke) the solution to severe economic contractions is to stimulate the economy through monetary policy actions by the central bank and fiscal policy actions by the government to stabilize output over the business cycle.
Keynes is retarded and anybody that follows his folly, likewise. The current financial meltdown is a direct result of keynesian monitary policy. As in all fiat expansionist nonsense, it will end in tears for the masses. The crooks in the big banks and their cohorts in congress made sure they will not suffer as they have gutted our treasury and the corrupt fed is totally complicit. The only way the government will keep rebellion at bay when this plays out, is to indict the criminals involved. Start at goldman sachs, jpm,c and bac. Then you might want to get the cuffs for paulson, franks, dodd, pelosi, reid, rangal, graham etc. We are not stupid out here, and know exactly the frauds that have been committed. We understand the aig conduit to goldman sachs and the foreign banks. The investment banks can computer trade the markets to whatever height they desire as they will be the ones holding the bag this time! As far as real estate, anybody with a brain knows it probably has at least another 50% to fall. Peoples wages can’t support such high valuations now that the liars loans are no longer avialable. They can try and push as much credit as they want to the masses as we flat out reject it! Who the hell wants to borrow money when they fear losing their jobs? Oh, wait a minute turbo timmy has another plan, the crooks put up a couple percent risk to buy the toxic crap from themselves and the balance will be backed by the people. Jail is too good for these idiots, except many of them would probably look good dressed up as bubbas bitch!