If we get 3% growth from here on starting soon that’ll be fine too. Under this regime, the only sensible way of thinking about whether money is easy or tight is relative to the goals of the central banks. Those who seek a return to the gold standard are just calling for a different form of government intervention.Frankly, I am not a fine tuner. (Hoenig, Fisher, etc.) Conceivably, such a step might make sense in a situation in which a prolonged period of deflation had greatly weakened the confidence of the public in the ability of the central bank to achieve price stability, so that drastic measures were required to shift expectations. If they forecast incorrectly and thought the spending was a permanent change, there would be a great deal of resources directed into eventually money-losing projects with the aim of expanding capacity.It seems that you want me to acknowledge that spending drives an economy.
And there’s a huge difference between more fiscal stimulus and more monetary stimulus. Mises obviously acknowledges that don’t have to be the case, but most “modern” Austrians keep on talking about a world which is 150 years old. [] They bought bonds pre-recession, and their market value has zoomed do to fallen interest rates. If entrepreneurs were able to figure out that this was a one time shot of spending, it would give the economy a temporary boost. In general the Fed doesn’t view inflation as something to fight after it impacts the economy, rather something to start fighting as soon as precursors to inflation arise.2. Is there a simple way to recast NGDP targeting as ‘free market monetary base targeting’ in a way that doesn’t cause the hawks to fret about trying to inflate our way to prosperity? So, I hate it when people say QE was some sort of extra ordinary government intervention. I see no support for this option on the FOMC. He is widely hailed by the “experts” as being the biggest expert on the errors of the Great Depression.Where are the 36 masked economist who are arguing for tightening and how are they able to control the Fed?If this survey you point too is so important in determining the monetary policy then perhaps we should have more of the surveys and pay greater attention to them.Not sure if you are being sarcastic, but I am not arguing for a gold standard. To summarize, just 10 years before 1931, money had been much tighter by any measure (base, money supply, deflation, interest rates) and the fall in economic activity greater, yet the economy recovered vigorously. In one case NGDP fell about 20%, in the other it fell about 50%. With the Wall Street Crash of 1929 and the onset of the Great Depression, the call-loan market declined and rates stagnated. The Austrian position is that the Feds actions during the 1920s had created systematic mal-investment and that mal-investment is the fuel for the crash.”I hope your still reading too. The best policy is for them to shut down, the second best policy? Please feel welcome to examine my book with full references. Paul Solman: If by “interest rates” you mean the rate set by the Fed — the Fed funds rate — it rose to TWENTY PERCENT in 1980. interest rates in the 1930s, and especially surprising, low rates during the expansion from 1933 to 1937. It’s very likely that the Fed’s decision to reduce the monetary base by 7% was a major cause of the sharp contraction of 1929-30 (after October 1930 the base rose, as the Fed partially accommodated higher currency demand during the bank panics.) This is something Milton Friedman failed to anticipate.”Not only did Milton Friedman anticipate it, he celebrated it.
The presence of these real estate (1926) and 1929 stock market crash were directly attributable to easy money. This entry was posted on July 21st, 2011 When 10% are unemployed, far more have temporary bouts of unemployment. Yes, I want inflation, we need inflation, even up to 5 percent annually for a few years. It’s appropriate for any country up against the zero rate bound.“The mystery I was pointing to is why the 1921 recession didn’t lead to a great depression. By the summer of 1938 (after the Fed had reversed course), the base was growing at more than a 20% annual rate. The early 1930s are a good example–NGDP fell in half. That’s a drop of over 7%, one of the largest declines in the 20th century. Lending at a high rate of discount forces companies to be honest. Wealth is created by the response of management and labor to the slip of paper–the ben Franklin–that give you a claim on other people’s output.I have issued clarion calls to all drug lords to re-patriot the $800 billion or so US dollars (Ben Franklins) circulating offshore. Haven’t heard from him much recently.You really need to stop thinking that low interest rates mean easy money, that has things exactly backwards.Jim Glass. BTW, there were other differences, like Hoover’s high wage policy, and his big tax increases. The following chart shows the inflation rates during the period from 1930-1939.