A
fine example of something that isn't wackonomics....
Quote:
[price] Stabilization policy is a war on human volition...
When you speak to people about this issue [price stabilization], it is best to use a simple analogy. Choose any good you can think of. Let's say it is the price of milk that takes a sudden tumble and milk producers don't like this state of affairs. Government swears that it will raise the price of milk and does so by fiat. Milk is declared to cost $6 per gallon. What will happen? It will sit on the shelves as consumers move to substitutes.
Then the stores themselves will have surpluses and might even demand compensation. They certainly won't buy anymore from producers. Then the producers will complain. At this point government can bail out the producers, or buy the milk themselves. Perhaps they will ultimately require everyone to buy milk and drink it. But ultimately, short of turning all citizens into tin soldiers, there is nothing that government can do to change the underlying reality. A war on prices is a war on human choice and, ultimately, a war on unchangeable aspects of reality.
To confront this truth is to come face-to-face with economic law. Economic law is something that surrounds us constantly as a fact of life and a driving force of the material world. To deny economic law is akin to denying gravity or the change of seasons. But its principles remain abstract enough to require careful thought in order to discern them and comprehend their meaning.
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this is something I really appreciate from the Austrian school -- Economic Laws are just that,
Laws. They can't be set aside by government fiat. Government actions create reactions in accord with Economic Laws....
So, let's suppose that Big Gov controls the money supply and interest rates and decides it wants to maintain low interest rates for a decade or more -- there are economic laws that
will be obeyed....what should we expect if the government maintains very low interest rates for an extended period of time =>
- very high leverage rates (ie, everybody's loaded down with debt, and why wouldn't they borrow heavily when the cost of debt is so low);
- very low savings rates (what's the point of pumping money into a cd when it's returning 2.5%);
- massive asset price inflation (the price of stocks are "discounted" by the prevailing interest rates, in theory, hence artificially low interest rates leads to artifically high prices. Houses, too....lower mortgage payments = higher housing prices)
Sound familiar?
So what happens when everybody is loaded down with debt, nobody has any savings, and assets are way over-priced????
People quit borrowing, and people quit lending, and people quit buying shit. The only way to prevent this is for the government to put guns to peoples heads and force them to borrow and buy (vote Obama!).
But we're not going to hear that the current economic situation is
exactly what one would expect given the long policies and actions of the government -- the toadie propagandists at CNNFOXMSNBC will constantly assure us that the problem lies in the 'free market', notwithstanding the undeniable fact that we don't have anything resembling a free market in money in the first place.