Comments on: Central Bank Tries to Determine Interest Rates as Far as it Can

By: John L. Pehrson

John L. Pehrson — Fri, 21 Nov 2008 03:48:02 +0000

Speaking of government coming to save the day, I realize governments worldwide are attempting to re-inflate their economies by flooding the system with money. Everyone seems to assume they will be successful, and, after a recession, we will see a new round of inflation.

However, can this go on and on indefinitely? At some point doesn't the system collapse, as the public loses confidence in the system? Are we there yet?

By: ralph hill

ralph hill — Fri, 21 Nov 2008 02:04:03 +0000

Maybe I drank one bottle of scotch too many, but I'm fairly certain that Mises never wrote in HUMAN ACTION that markets are efficient, rather it is just way much better than centralized gov't planning.

So if you think what's become of Wall Street is bad, just wait till the gov't comes to save the day...

By: mike

mike — Thu, 20 Nov 2008 20:25:57 +0000

...storytime for baby bankers.....once upon a time a fly on the wall says to a grape on the vine.....look...at the dawn of the day, the banker's shadow is very big....there's much work to be done and mr.obolo the banker has a full vault of credit to lend....see...at mid-day the banker's shadow is little....productive capacity has reached it's zenith and the banker has an empty vault of credit to lend....observe....at the sunset of the day, the banker's shadow is very big again, except it's in the opposite direction and his vault is full of debt while there's no more work to be done...nighttime is a time of consolidation and rest not depression....or nightmares....tomorrow the tired wake up refreshed and debt wakes up as credit....BUT lo ....caraspita!!........ out in the moonlight comes mr. shadow banker...dancing naked all around with vaults full of notional credit to lend....and sirens of counterproduction around every corner...every one...smiling seductively invests...no no...at times like this, it's best to be snug as a bug in a rug...as pharoah says "find a secret safe location..it is here that (i) recline under my gold sleeping mask"...but now mr.obolo the day banker is afraid of his own shadow...as the earth reclines on her axis relative to the sun, day is so much shorter than night....at these times the shadow bankers run wild....poor mr. obolo, the sun is so low in the sky that his shadow stays so big all day long and it's difficult to know if it is the shadow of credit or debt that he sees on the ground....all the mr. obolos everywhere don't trust even each other to know the difference so they'll just have to "hang on" until the days become longer....viva dia is their motto...mr. dia obolo is not well liked by the shadow bankers who even make fun of his name....the moral of the story ; one must not paint all bankers with the same brush...

By: Ross Delaney

Ross Delaney — Thu, 20 Nov 2008 07:10:18 +0000

I am heartened reading all the above. I also believe Friedman gets a bum wrap, especially from the point of view of his late revisionary work ignored by the pump primers. Luddites grab what they want and take radical positions. In Australia from the mid 80's when the banks were let off the leash and the big red bodgy CPI interest rate lever became the only act in town we have had the exact "disequilibrium" and "malinvestment" referred to above. In those years we managed to produce that combination of high interest rates and high asset price inflation referred to. Aside from holding up the govt surplus better than the UK & US, from the mid 90's on we joined the anglo-western party. But little does that matter when the CAD-to-GDP and household debt-to-income ratio is so much worse.

By: Coffee Addict

Coffee Addict — Thu, 20 Nov 2008 05:29:20 +0000

The views of Marx and Mises are not mutually exclusive.

Marx and the "utilitarian liberals" and Labour Movements of the 19th Century were absolutely correct in pointing to the reality of market failures everywhere.

Mises was correct in believing "manipulation" of markets leads to misallocation of resources and trade cycle booms and busts.

Friedman and the monetarists accepted many classical views emphasising the futility of fiscal policy (in interconnected markets with free capital flows) and emphasise that tight monetary policy is needed to avoid excessive booms and busts.

Keynes' view that Governments could "kick start" an economy from a bust hold true in some circumstances only. I he assumed that governments sitting on mountains of gold and other reserves could do it at SOME points in the cycle. I doubt very much whether Keynes would agree that debt churning and political pork barrelling would do the job – although some of less able ascendants seem to think so. He would realise that losses first needed to be realised.

All four men were free thinkers who correctly analysed the circumstances of there respective times. All four would recognise the scope and limitations “defined” economic models. All four would be eclectic and innovative in their suggestions for dealing with the current crisis. None would suggest that there was a quick fix.