by Jeff Berwick, The Dollar Vigilante: It’s already bad enough we live in a world overpopulated by idiots. Worse, they are often in charge of ‘the monetary system’ and even head up ‘the media’! Luckily for tomorrow, entrepreneurs are busy developing a decentralized crypto-monetary platform for a money that nobody can control, and an alternative media, of which we are part.
One recent article encompassed precisely the unnecessity of the stupidity of central bankers and their mainstream financial media lapdogs.
The article was entitled, “Amazon cutting prices at Whole Foods will not cause deflation.”
The author was responding to a quote from a Fed official, Charles Evans, who claimed the merger would result in lower grocery prices.
Naturally, technological innovation and other types of productivity enhancements bring falling prices, which can ultimately be construed as a mild type of deflation.
But that is good news and doesn’t call for a policy to offset it! We all look for deflation when we go shopping. Evans doesn’t shop, apparently. He sees this as a bad thing, something that may make it harder for the central bank to achieve its 2% “inflation target”! Heaven forbid!
In this central banker’s view, falling prices produce unemployment, which leads to more falling prices, then more unemployment in a vicious circle like what happened in the 1930’s. This is the debt-deflation spiral formulated by Irving Fisher and later Keynesians, typically in defense of why we need to have a central bank, or why we need to have a policy of constantly rising prices.
In the typical Keynesian central planner's playbook, rising prices create the opposite: growth!
You can recognize a Keynesian instantly by whether or not he or she believes that they can create growth with the printing press. Many will regardless try to obscure this assumption in their theories, as if they know it is an inherent weakness. As Evans’ critic, and central bank sympathizer, put it in his article: "prices rising modestly [over time] encourage both households and corporations to spend and invest money now.”
He agrees with Evans on this; this is what many people believe today, including those employed by Wall Street.
Like typical Keynesians, however, none of them appreciate the trade-off between consumption and investment. If prices are generally rising, that means the value of money is generally falling, which encourages households and business to consume at the expense of investing now.
But, you can’t increase consumption and investment simultaneously! Sure, both can be considered as “spending” of money quantities, but tell it to the Keynesians constructing the GDP accounts.
That’s not the issue here. They believe price rises engages the “animal spirits.” What is really happening though is that by printing money and lowering interest rates they are encouraging consumption at the expense of saving, and replacing investment by the public with investment from the bank’s printing press directed by Wall Street, government, and the banking cartels.
To really understand all the fallacies inherent in that worldview is to understand the gold story and now the emerging crypto story. Ultimately, the weakness in the Fisher-Evans view is that they think the debt-deflation spiral, like all economic depression, is brought on by an inherently unstable and unbridled free market capitalism in the post-industrial age.
But let me tell you something else that started to become apparent in the post industrial age in the West: central banking and their unnecessary management of economic systems! Tulipmania, South Seas, the Mississippi bubbles all occurred in the era of central banking alongside western industrialization.
I mean, forget about the academic fact that indexes like the CPI are fallacious from the get-go because the value of money does not drop uniformly, and the weightings and baskets in the real world always change. Always, always, always, day to day. Their chained indexes and all the other statistical measures in the world will never capture the dynamic nature of subjective whim.
Not only that, but their underlying assumption is that money, and hence prices, should be stable in the first place, or that if not, they should know exactly how stable it should be, not the market.
The Austrian economists have shown that it is this fatal conceit and the interference in money quantities and the rate of interest that bring about the boom-bust cycle to begin with, as well as the ultimate depreciation in the value of money, which comes with it the occasional and sudden drop in confidence experienced in decades like the seventies, the mid-thirties, or more recently.
That is, it is the government supported and centralized system of fractional reserve banking that brings all the recessions and instabilities in the financial climate. In fact, this is even the big point that the movie, The Big Short, overlooked in putting the blame on the banksters and their greed in creating collateralized obligations and default swaps. The problem was right there, the movie even portrayed it but only in passing: it was the government guarantee underlying them!
I can’t say that by ending this system we would end all financial crises, but surely we would end the large ones that have become characteristic to western civilization in the last 100 years.
Regardless, it is in the aim of trying to achieve growth through the printing press and by trying to stabilize the financial and economic instabilities brought about by this attempt that we get the boom-bust cycle and the inflationary outbreaks that the central planners claim to exist to fight.
To fool Americans about this has only required a public education to get the message across that without your government saving and investing and lifting prices for us, we would be poor.
The dumbing down of America could not be more evident than it was by reading one of the few criticisms ushered in by ‘the media’ against Evan’s pronouncement and worry about this. No need to worry, said this author, the Amazon Whole Foods merger will not cause prices to fall! And we are all saved as a result, because prices won’t fall! We can all agree that prices won’t fall.