QE2 was essentially the last bullet in the Fed's gun. QE2 was intended to do two things, give the economy a boost with the cash infusion, and keep the dollar relatively weak to counter the Chinese and help exports.
There obviously a risk of QE2 giving rise to or exacerbating inflation, but the Fed decided it was a neccesary risk. High commodity prices ie oil, will undoubtably impact inflation, but what else was the Fed to do?
As to low wages being responsible, Willy is an idiot and I think he talks just to hear himself speak, explaing why he is wrong is a waste of time. Morons, just like all other stupid people, rarely recognize these traits in themselves
I think I may go back to being a "Willyholic" lol
"As to low wages being responsible, Willy is an idiot"
I've posted the graphs for this before, but if necessary I would be more than happy to do it again. I have pointed out in the past that when the real value of the minimum wage (late 60s, early 70s) was the highest, unemployment was at the lowest rate of the 20th century. I have also pointed out that GDP was at the highest rate of the 20th century during this time period as well.
What explains this, if not that higher wages results in a stronger economy?
Please give me something else linking "cause and effect" and I would be more than happy to refute it. Until then simply stating the equivalent of "when Willy posts, moronic post increase" without any evidence that would indicate causation, simply isn't worth debating.
I would like to further offer that Richard Nixon was responsible, as this happened under his watch, or maybe Watergate caused it? rofl
Ever hear of [i]post hoc ergo propter hoc[/i]?
There are a vast number of other factors that affect unemployment, such as inflation, productivity of labor, regime stability vs. regime uncertainty, and other regulations.
The late 70's marked the total abandonment of the gold standard. I could easily argue that that is the reason for the health of the middle class before then, and its decline since. But I wouldn't because improvements in technology, capital accumulation and industrialization have led to productivity improvements that have improved the condition of the middle class, though monetary instability has caused more unemployment.
Comparing any period in America's history to another is always a mixed bag. Some government controls are added, others removed. You can't blame our current problems on any one thing, and definitely not free markets, at all.
During the late '60s and early '70s it distorted the entire economy. Unemployment was low because the defense industry was working full blast and the whole economy was primed with all those dollars. Not to mention that the draft kept a lot of people out of the work force. I'm sure that doesn't explain all of it but the war distorted the entire economy.
High commodity prices are a CONSEQUENCE of inflation, not a cause.
As for QE2, we were talking about the causes of the boom and bust cycle, in particular the last two recessions. If you want to talk about the next recession, we can bring up QE2. QE and the present low interest rates are responses to the problems the Fed caused already.
The Fed caused the housing bubble by holding interest rates down near 1% after the tech bubble burst, and before that, the low interest rates the helped cause the tech bubble itself.
My point was that AS A CONSUMER, you are not really any better off. And most union members want higher wages because they want to consume more.
You are precisely correct to say that prices don't all rise proportionately. That is the problem, the reason why this rise in all prices leads to the boom and bust cycle. Sure, the gains you get while the boom is in progress seem very nice, but you pay for it during the bust. Its called injection effects. All that new money doesn't go directly to wages and consumer goods. Banks first borrow it from the central bank, and they lend it all over the place. Much too much of it goes into speculative investments, like housing construction around 2005. Or internet stock in the 90's. Or the stock market in the late 1920's. Or tulips in Denmark, or stock in the Mississippi company in 1719.
As for conclusive cause and effect between central banking policy and economic disaster, you haven't read enough of what the Austrian school says on the subject. Murray Rothbard did a study showing how much new money was created in the 1920's, most of which went back where it came from after the crash of '29.
And I would think that this most recent recession would be excellent evidence.
Of course, the book in the OP promises more such analysis, showing how both the tech bubble and the housing bubble were caused by Fed policy.
From the Preface the the Second Spanish Edition, December 2001:
In the wake of a decade marked by great credit expansion and the development of a large financial bubble, the course of economic events in the world from 1999 through 2001 was characterized by the collapse of stock-market values and the emergence of a recession which now simultaneously grips the United States, Europe, and Japan. These circumstances have left the analysis presented in this book even more clearly and fully illustrated than when it was first published, at the end of 1998. While governments and central banks have reacted to the terrorist attack on New York’s World Trade Center by manipulating interest rates, reducing them to historically low levels (1 percent in the United States, 0.15 percent in Japan and 2 percent in Europe), the massive expansion of fiduciary media injected into the system will not only prolong and hinder the necessary streamlining of the real productive structure, but may also lead to dangerous stagflation.
One thing that Desoto claims to prove is the central banking is a form of socialist central planning, the very kind that von Mises and history have proven cannot work. Central banking fails for exactly the same reasons as socialist central planning.
The most rigorous economic analysis and the coolest, most balanced interpretation of recent economic and financial events support the conclusion that central banks (which are true financial central-planning agencies) cannot possibly succeed in finding the most advantageous monetary policy at every moment. This is exactly what became clear in the case of the failed attempts to plan the former Soviet economy from above. To put it another way, the theorem of the economic impossibility of socialism, which the Austrian economists Ludwig von Mises and Friedrich A. Hayek discovered, is fully applicable to central banks in general, and to the Federal Reserve—(at one time) Alan Greenspan and (currently) Ben Bernanke—in particular. According to this theorem, it is impossible to organize society, in terms of economics, based on coercive commands issued by a planning agency, since such a body can never obtain the information it needs to infuse its commands with a coordinating nature. Indeed, nothing is more dangerous than to indulge in the “fatal conceit”— to use Hayek’s useful expression—of believing oneself omniscient or at least wise and powerful enough to be able to keep the most suitable monetary policy fine tuned at all times. Hence, rather than soften the most violent ups and downs of the economic cycle, the Federal Reserve and, to some lesser extent, the European Central Bank, have most likely been their main architects and the culprits in their worsening.
George Selgin has demonstrated, quite clearly, that the Fed was mainly responsible for the housing bubble. See the link "Guilty as Charged" below.
-- Modified on 3/11/2011 1:44:05 PM
