…is apparently not only adequate for Greg Mankiw, who suggested that the FED should create hyperinflation to solve the economy (I know thats not what he said, but thats the result of his policy), apparently the same goes for the FED. Great. The guys at the biggest banking monopoly in the world have just gone out and said that the economy needs interest rates of -5%. Do you people understand the implications of this? (for a nice slashing of Mankiw by Robert Murphy, go here)
This is the equivalent of saying that in order to “save the economy”, the FED wants everyone to borrow from their neighbours savings, and only return 95% of it a year later. What the FED thinks is that the fact that someone else goes out and spends your money is going to revive the economy. But while the FED thinks that money = wealth, and that they can print money to cause inflation and make the real interest rate drop below zero – in the real world, money lent out has to come from somewhere. This means that any and every dollar saved anywhere should according to the FED be devalued by 1/20th per year, or more. Because what is the difference of you lending someone $100 and getting back $95 – and you taking $5 and burning it? From your perspective – nothing, except that the borrower in the first scenario may default and then you get nothing back.
Instead of $100 being available for investments for the future at a sound interest rate, the FED wants said $100 to be given to some reckless idiot that will spend it, and default because he won’t even be able to pay back the $95 that the FED wants.
This is by far the worst argument ever heard. If this is what you honestly believe, then why don’t you just take ol’ Bernanke literally.
Print one gazillion dollars, load it into airplanes and lay a nice mat of money over every american city. There. You now have inflation enough for your -5% interest rates.
Hyperinflation anyone? Ultra-hyperinflation anyone? Peter Schiffs videoblog puts it more eloquently than me …
*sigh*….
OK, bailing isn’t working. Maybe we should try pouring water into the boat.
A very good idea my dear Geoih, but I’m afraid that pouring water into the boat is very oldfashioned. No – according to the latest publications by economists worldwide, we should drill several holes in the boat so that water pours in. This will create a positive movement downwards, and as long as we all lean forwards while standing in the boat, this will redirect the movement forwards. Greg Mankiw told me so.
I was thinking, we’re dismissing this idea too easily and not looking at all of the potential benefits.
You loan out money at a negative interest rate, but then you charge a fee to everybody who has a job for the benefit of having their job. A kind of negative salary. Then you make having a job mandatory.
We’ll call it slav… no. Serfd… no. I know, we’ll call it volunteerism, or patriotism, or national service.
Yeah! That could work. Marketing will be the key. We’ll need lots of flags and babies and pretty girls. Make sure you get the churches to buy in, too.
What I’m thinking is this – the paper-and-printing industry is going to become VERY profitable. That if anything is a reason to print up loads of cash and hand out at negative interest rates. I mean – if we print enough, hell, it will drag the economy out of this mess in a jiffy! Just think of all the jobs we’d make :
- Money printer supreme
- Money distributor (major)
- Money distributor (local)
- Money truck driver
- Money quality assurance regulator
- Money transaction fairness transparency regulator
- Quantitative money market investigator
- Money-burning-energy plant foreman
- Money food-substitution science planner
…you get where I’m going. In the end – it would all be so much easier if we just stopped producing anything but money – so I think the crisis will be solved once they find a way to create eatable, wearable, burnable, and everything-else-able money!