This is a MUST READ analysis. Insight like this is why he deserved the Nobel prize.

Monday, January 24, 2011

Unknown said...: "...the collision between deflating incomes and unchanged debt can greatly worsen economic downturns." Only for people who are in debt. If you have no debt then deflation makes you better off. We cannot steal from one group and give to another and expect the economy to get better. Cutting the top off of a blanket and sewing it onto the bottom doesn't make the blanket longer.

Sticky prices and wages are a result of a large public sector and a social safety net. Destroying wealth in an economy to save unsustainable business models and fiscally irresponsible people will never be good for economic growth.

Inflationary monetary policy is also directly at odds with property rights and property rights are the prerequisite for all freedom.
"...inflation is probably the most important single factor in that vicious circle wherein one kind of government action makes more and more government control necessary. For this reason all those who wish to stop the drift toward increasing government control should concentrate their effort on monetary policy." ~ Hayek

AGAIN - you cannot change the reality of the game using the scoreboard. All government stimulus, price controls, subsidies and deficit spending are LIES about supply and demand. Scarcity is a real thing and a part of life, you can only lie about it for so long before reality finds you. One of these days the pain of reality is going to make a mess of the dollar and our economy.; January 24, 2011 at 4:26 PM

Funny Economist - Randall Parker's Completely Serious Macroeconomics Blog