Skip to main content

The End of Fed discipline

When people borrow too much, the best thing that can happen is a large dose of inflation. The nominal value of the debt stays the same, (plus interest) but the real value of the debt falls dramatically.

The second rate cut from the Fed in less than a week now takes interest rates under the US inflation rate.

The consequence will be a sharp fall in the US Dollar. All the massive debts that the US has contracted in Dollars will now fall in real terms.

The Fed is debauching the currency: the cardinal sin of Central Banking.

The consequences will include the end of the US Dollar as the sole reserve currency.

Meanwhile the ECB is maintaining interest rates in an attempt to reduce Eurozone inflation. This will hurt in the short term, but in the long term, it will prove to be a far wiser policy that the recklessness of the Fed.
Labels:

Comments

Post a Comment

Popular posts from this blog

Waiting for the Barbarians

What are we waiting for, assembled in the forum? The barbarians are due here today. Why isn’t anything going on in the senate? Why are the senators sitting there without legislating? Because the barbarians are coming today. What’s the point of senators making laws now? Once the barbarians are here, they’ll do the legislating. Why did our emperor get up so early, and why is he sitting enthroned at the city’s main gate, in state, wearing the crown? Because the barbarians are coming today and the emperor’s waiting to receive their leader. He’s even got a scroll to give him, loaded with titles, with imposing names. Why have our two consuls and praetors come out today wearing their embroidered, their scarlet togas? Why have they put on bracelets with so many amethysts, rings sparkling with magnificent emeralds? Why are they carrying elegant canes beautifully worked in silver and gold? Because the barbarians are coming today and things like that dazzle the barbarians. Why don’t our distingui...
Post a Comment
Read more

Liberal Democrats v Conservatives: the battle in the blogosphere

It is probably fair to say that the advent of Nick Clegg, the new leader of the Liberal Democrats, has not been greeted with unalloyed joy by our Conservative opponents. Indeed, it would hardly be wrong to say that the past few weeks has seen some "pretty robust" debate between Conservative and Liberal Democrat bloggers. Even the Queen Mum of blogging, the generally genial Iain Dale seems to have been featuring as many stories as he can to try to show Liberal Democrats in as poor a light as possible. Neither, to be fair, has the traffic been all one way: I have "fisked' Mr. Cameron's rather half-baked proposals on health, and attacked several of the Conservative positions that have emerged from the fog of their policy making process. Most Liberal Democrats have attacked the Conservatives probably with more vigour even than the distrusted, discredited Labour government. So what lies behind this sharper debate, this emerging war in the blogosphere? Partly- in my ...
20 comments
Read more

Lib Dem v. Tory (Round 2)

The Liberal Democrats stand for a distinct political ideology. It is an ideology built around both socially and economically liberal precepts. In as far as our ruling Labour government can be said to have an ideology at all, it coincides with Liberalism only incidentally. Labour stands for pragmatism, and where it does not there is still a core of values that are collectivist and not individual. Sometimes people are prepared to claim the moral high ground for policies of social solidarity and redistribution of wealth. Liberals may argue in favour of equality of opportunity, we can not argue in favour- as Socialists do- of "and equal society". The reason is simple: Socialism does not work. If one places equality above freedom, then eventually we get tyranny. This is why, while we may argue in favour of a more equal society as being a stronger society, the tools that we may use to gain -in our view- socially desirable outcomes must rest upon freedom above all else. As PJ O'...
14 comments
Read more