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Tuesday, December 02, 2008

Denying the inflationist dogma: Bernanke and the futility of monetary policy

Charles Anthony of The Politic writes:

When the price of the US dollar is approaching zero, the Federal Reserve Chairman, Ben Bernanke reveals a bitter truth about the futility of monetary policy

The U.S. economy “will probably remain weak for a time,” even if the credit crisis eases, Bernanke said yesterday in his speech. While the Fed can’t push interest rates below zero, “the second arrow in the Federal Reserve’s quiver — the provision of liquidity — remains effective,” he said.

Maybe eventually — after the Fed prolongs the recession and fuels malinvestments — more Americans will wake up to the fact that inflating the money supply is not about stimulating the economy nor about helping the public. It is all about giving new money to the banks first. In Canada, such monetary inflation goes unnoticed or without debate.

Anthony is absolutely right on his final point. There is so little debate on many of the most important economic issues in Canada because there is no diversity of opinion; all major parties in Canada agree with the Keynesian policies of "spend, baby, spend," easy credit from the Bank of Canada, more "investment" in infrastructure, and a government backstop for mortgages and lending institutions.

With the winds of 'change' seemingly blowing North to Canada, I fear we are entering a terrible era of economic interventionism in North America.

Posted by Kalim Kassam on December 2, 2008 in Economic freedom | Permalink


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With respect, the price of the US dollar is the interest rate. When the Fed is making loans available for virtually nothing, the price of the dollar is approaching zero.

We could probably agree that different agents in the economy face different prices.

Posted by: Charles Anthony | 2008-12-02 7:55:13 AM

Thanks Charles, I should have read your statement twice before dismissing it.

Posted by: Kalim Kassam | 2008-12-02 12:05:36 PM

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