Let’s face it, the world is getting dangerous, and those with wealth throughout the world are finding U.S. Treasuries. Capital flows into the U.S. economy has appreciated the dollar. This along with deflation is a very good sign for American citizen, its a relation Keynesian govmint hates. Let me explain.
Our founders implicitly knew of the relation between solvency and liberty. That ethical bulwark died a long time ago when the U.S. closed the gold window providing spot gold redemption for our paper. Now the dollar isn’t convertible into anything. But with the arrival of digital domesticated technology something interesting happened, fiat money tied to the progressive ideology has met the bulwark of autonomy. We’re now nomads. The ‘new’ knowledge economy returns us to a wandering nomadic state, and if we can reform the tax code, re-boot the dollar and reform our domestic political economy, we can expect a boom post 2016. The threats to our new economy are mainly intellectual: confiscatory taxation, depreciation, cash transfer state economies aren’t new ideas. In fact the whole damn thing is collapsing, which brings me to deflation.
The soaring drop in prices in the early 1920’s & ’30’s were deflations resulting from finanical panics, where central banks, being wed to an archaic idea of ‘real bills doctrine‘ couldn’t or didn’t accommodate a new sudden demand for money. Hense, deflation.
I don’t think its a good analogy to explain today’s collapse in prices.
We’ve got a ZIRP (zero bound interest rate policy) and Q.E infinity to match ample money growth with exceedingly low credit spreads. Today’s deflation is simple to explain, people don’t trust their governments, they’re not spending!!
Why does fatboy govmint hate deflation? Its simple, they don’t want heavy expenditures. They want you to have cheap, worthless paper, but they cannot permit expensive high purchasing power parity! Remember, when the sovereignty of the people is threatened, the Keynesian politico’s wake-up.
Are you sick of hearing about ‘sticky wages’? Then unstick them with freedom of contract, less judical meddling (comparable worth/disparte impact), or discrimination suits. How about fewer occupational license fees??
If the central bankers want headroom then have them demonstrate their worth in mandating fiscal reform. Worried about servicing all that debt you lovingly printed?? How about a growth based economy?? The technocrats want it both ways, print/borrow truck loads of money and spend it on stimulus right??????? This is how we got stymied demand with formal institutions loving fiat money, interest rate targeting and outstanding government debt.
Here’s the most unsettling intellectual insight from all this central banker talk: so far the central banks of the world have a lot less understanding of inflation/deflation then they think.
The zero bound worry is here to stay. How about fiscal reform, tax reform, sound monetary rules based policy.
How about liberty.