Zenconomics

Fourteen Lessons for the Federal Reserve

submitted by jwithrow.

Excerpt from The Folly of the Fed’s Central Planning:

1. Increasing money and credit by the Fed is not the same as increasing wealth. It in fact does the opposite.

2. More government spending is not equivalent to increasing wealth.

3. Liquidation of debt and correction in wages, salaries, and consumer prices is not the monster that many fear.

4. Corrections, allowed to run their course, are beneficial and should not be prolonged by bailouts with massive monetary inflation.

5. The people spending their own money is far superior to the government spending it for them.

6. Propping up stock and bond prices, the current Fed goal, is not a road to economic recovery.

7. Though bailouts help the insiders and the elite 1%, they hinder the economic recovery.

8. Production and savings should be the source of capital needed for economic growth.

9. Monetary expansion can never substitute for savings but guarantees mal–investment.

10. Market rates of interest are required to provide for the economic calculation necessary for growth and reversing an economic downturn.

11. Wars provide no solution to a recession/depression. Wars only make a country poorer while war profiteers benefit.

12. Bits of paper with ink on them or computer entries are not money – gold is.

13. Higher consumer prices per se have nothing to do with a healthy economy.

14. Lower consumer prices should be expected in a healthy economy as we experienced with computers, TVs, and cell phones.

All this effort by thousands of planners in the Federal Reserve, Congress, and the bureaucracy to achieve a stable financial system and healthy economic growth has failed.

It must be the case that it has all been misdirected. And just maybe a free market and a limited government philosophy are the answers for sorting it all out without the economic planners setting interest and CPI rate increases.

A simpler solution to achieving a healthy economy would be to concentrate on providing a “SOUND DOLLAR” as the Founders of the country suggested. A gold dollar will always outperform a paper dollar in duration and economic performance while holding government growth in check. This is the only monetary system that protects liberty while enhancing the opportunity for peace and prosperity.

The Myth of Attention Deficit Disorder

by Thomas Armstrong, PHD – ICPA.org:

Over the past thirty years, attention deficit disorder (ADD), or attention deficit hyperactivity disorder (ADHD), has emerged from the relative obscurity of cognitive psychologists’ research laboratories to become the “disease du jour” of America’s schoolchildren. Accompanying this popularity has been a virtually complete acceptance of the validity of this “disorder” by scientists, physicians, psychologists, educators, parents, and others. On closer critical scrutiny, however, there is much to be troubled about concerning ADD/ADHD as a real medical diagnosis.

There is no definitive objective set of criteria to determine who has ADD/ADHD and who does not. Rather, there are a loose set of behaviors (hyperactivity, distractibility, and impulsivity) that combine in different ways to give rise to the “disorder.” These behaviors are highly context-dependent. A child may be hyperactive while seated at a desk doing a boring worksheet, but not necessarily while singing in a school musical. These behaviors are also very general in nature and give no clue as to their real origins. A child can be hyperactive because he’s bored, depressed, anxious, allergic to milk, creative, a hands-on learner, or has a difficult temperament, is stressed out, is driven by a media-mad culture, or any number of other possible causes.

The tests that have been used to determine if someone has ADD/ADHD are either artificially objective and remote from the lives of real children (in one test, a child is asked to press a button every time he sees a 1 followed by a 9 on a computer screen), or hopelessly subjective (many rating scales ask parents and teachers to score a child’s behavior on a scale from 1 to 5: these scores depend upon the subjective attitudes more than the actual behaviors of the children involved).

The treatments used for this supposed “disorder” are also problematic. Ritalin use is up 500% over the past six years. Yet, Ritalin does not cure the problem; it only masks symptoms. In addition, there are several disadvantages to Ritalin: children don’t like taking it, children use it as an “excuse” for their behavior (“I hit Ed because I forgot to take my pill.”), and there are some indications it may be related to later substance abuse of drugs like cocaine. Behavior modification programs used for kids labeled ADD/ADHD work, but they don’t help kids become better learners. In fact, they may interfere with the development of a child’s intrinsic love of learning (kids behave simply to get more rewards), they may frustrate some kids (when they don’t get expected rewards), and they can also impair creativity and stifle cooperation.

ADD/ADHD is a popular diagnosis because it serves as a tidy way to explain away the complexities of turn-of-the-millennium life in America. Over the past few decades, our families have broken up, respect for authority has eroded, mass media has created a “short-attention-span culture,” and stress levels have skyrocketed. When our children start to act out under the strain, it’s convenient to create a scientific-sounding term to label them with, an effective drug to stifle their “symptoms,” and a whole program of ADD/ADHD workbooks, videos, and instructional materials to use to fit them in a box that relieves parents and teachers of any worry that it might be due to their own failure (or the failure of the broader culture) to nurture or teach effectively. Mainly, the ADD/ADHD label is a tragic decoy that takes the focus off of where it’s needed most: the real life of each unique child. Instead of seeing each child for who he or she is (strengths, limitations, interests, temperaments, learning styles etc.) and addressing his or her specific needs, the child is reduced to an “ADD child,” where the potential to see the best in him or her is severely eroded (since ADD/ADHD puts all the emphasis on the deficits, not the strengths), and where the number of potential solutions to help them is highly limited to a few child-controlling interventions.

Instead of this deficit-based ADD/ADH paradigm, I’d like to suggest a wellness-based holistic paradigm that sees each child in terms of his or her ultimate worth, and addresses each child’s unique needs. To do this, we need to provide a wide range of options for parents or teachers.

Article originally posted at ICPA.org.

Investors Are Coming to Grips with Reality

by Justin Spittler – Hard Assets Alliance:

Today’s financial markets have acquired a knack for ingesting bad news without so much as a hiccup. Lately, that same resiliency—or more appropriately, complacency—has come under pressure.

After lying dormant for months, volatility has come storming back with a vengeance. Investors are finally coming to their senses—much to the delight of the precious metals community.

Patience Wearing Thin

The problems facing the global economy didn’t come out of nowhere. It just took a jolt of volatility to put them in the spotlight—and you can thank the soaring US dollar and the collapse of energy prices for putting investors on high alert.

Of course, there are perks to a strong dollar and cheap energy. A strong dollar makes imported goods more affordable for American consumers, while it’s estimated that weak oil prices will put roughly $500 into the wallet of the average American driver. While neither is positive for precious metals, the euphoria won’t last long.

An appreciating US dollar makes American exports less competitive. Depressed oil prices could cripple the domestic energy revolution, which has been the backbone of the US recovery. The breakout of the dollar also threatens to derail commodity-centric emerging markets, particularly nations that have relied on cheap credit for growth.

Monetary Tools Becoming Dull

The precarious state of the global economy doesn’t just have investors on edge. Policymakers in countries across the globe face a dilemma: risk an economic crash by stepping away from their maligned economies, or provide their debt-addicted with another dose of stimulus. It’s a lose-lose situation.

Yet it’s a no-brainer for central bankers, whose greatest fear is deflation.

The situation is no different in the United States even though the Federal Reserve ended its quantitative easing program in October. Remember, the Fed has said it will be “patient” in raising rates; and you can bet Yellen will fire up the printing press the second that the US economy shows symptoms of flatlining.

Unfortunately, the next round of stimulus won’t be as effective as previous installments, and investors seem to be waking up to that harsh reality.

Perceptions Change; the Case for Gold Stays the Same

As an analyst, I spend most of my days sifting through data, crunching numbers, and gathering different perspectives in an attempt to gain clues about the future. And yet, I’ll be the first to admit that economic forecasting is a silly process. Nonetheless, my feeling is that gold has hit a bottom.

That’s probably something you’re sick of hearing. Some in the precious metals community have been calling an end to the gold market rut for months… others for much longer.

Why do I think that this time is different? It has little to do with fundamentals. The case for owning gold has changed little recently, although we’re receiving more and more reminders. What’s changing is the perception of Western investors.

After witnessing unconventional monetary policies push financial markets to new heights, investors seem to be losing faith in this grand experiment. This uneasy feeling is starting to bring them back to gold—the most crisis-proof asset of all.

Luckily, there’s still an opportunity for investors to pick up gold while incurring little downside risk. There are few sellers at today’s prices, and those holding gold are what I like to call “strong hands.”

Even if gold hits a few speed bumps throughout the year, investors will sleep easier knowing that some of their wealth is held in the most time-tested of all assets.

Article originally posted in the January issue of Smart Metals Investor at HardAssetsAlliance.com.

To Empower! Not Control! A Holistic Approach to ADHD

by Thomas Armstrong, PHD – ICPA.org:

Thousands of studies tell us what children with ADHD can’t do, but few tell us what they can do. This article presents holistic strategies for helping children with ADHD succeed at home and in school by building on their interests, learning styles, and many talents.

Eight-year-old Billy, in the front row, will have nothing to do with my demonstration on new techniques for teaching spelling. During my visit to his elementary school classroom in upstate New York, Billy is out of his seat during most of the lesson. When I ask the children to visualize their spelling words, however, I am amazed to see Billy return to his seat and remain perfectly still. Covering his eyes, Billy “looks” intently at his imaginary words—fascinated with the images in his mind!

Later on, I realize that something more important than a spelling lesson went on that afternoon: Billy was able to transform his external physical hyperactivity into internal mental motion and, by internalizing his outer activity level, was able to gain control over it. This incident occurred some time ago but remains memorable to me. Why? Because it suggests that internal empowerment, rather than external control, is often the best way to help kids diagnosed with ADHD.

A Decidedly Unholistic Approach

Much of the current work in the field of ADHD looks at the issue from an external control perspective. The two interventions touted in almost all books and programs about ADHD are medication and behavior modification. While these approaches are often dramatically effective in young people with ADHD, both have troubling features that often receive scant attention. Some researchers suggest that when children receive medication, they may attribute their improved behaviors to the pills rather than to their own inner resources (Whalen & Henker, 1990). Others may expect the medication to do all the work and thus neglect underlying issues that may be the true causes of a child’s attention and/or behavior difficulties.

Behavior modification programs, which abound, seek to control children’s behaviors through some combination of rewards, punishments, or response costs (the taking away of rewards). Some programs rely on token economy systems, while others use behavior charts, stickers, and even machines. For example, the Attention Training System sits on a child’s desk and automatically awards a point every 60 seconds for on-task behavior. The teacher can also deduct points for bad behavior using a remote control. Students trade points for prizes and privileges. Although behavior modification programs may influence children to change their behavior, they do it for the wrong reason: to get rewards. Such programs can discourage risk-taking, blunt creativity, decrease levels of intrinsic motivation, and even impair academic performance (Kohn, 1993).

Looking at the Whole Child

Most ADHD researchers and practitioners see children labeled with ADHD in terms of their deficits. Thousands of studies tell us what these kids can’t do, but few tell us what they can do and who they really are. Two exceptions are Crammond (1994) and Hartmann (1993). Where are the studies that tell us what these kids are interested in, what kinds of positive teaming styles or combinations of intelligences they use successfully in the classroom? What sorts of artistic, mechanical, scientific, dramatic, or personal contributions can they make to their schools and communities?

A new vision of educational interventions is needed to reflect a deeper appreciation for the whole child based on a wellness paradigm, rather than a deficit perspective rooted in a medical or disease-based model. We need to initiate a new field of study to help children with behavior and attention difficulties—one based on discovering their strengths rather than fixing their faults. Parents and teachers tell me about cases of ADHD-labeled kids who are talented dancers, musicians, sculptors, and dramatists. The ADHD community needs to conduct research on the positive qualities of these children and what their abilities could mean in contributing to their success in the classroom and in life.

Such research could develop assessment strategies geared toward identifying their inner capabilities. Gardner’s theory of multiple intelligences (1983) is one possible framework for developing appropriate assessment instruments to help identify such abilities—a refreshing change from the behavior rating scales and artificial performance tests currently used to assess ADHD in children. We must develop individualized educational plans (IEP) that give more than lip service to a child’s strengths and have goals and objectives that solidly reflect a desire to help children achieve success, rather than to “overcome their problems.”

While the ADHD worldview tacitly approves of a teacher centered, worksheet- and textbook-driven model of education (almost all of its educational suggestions are based on this kind of classroom), current research suggests that all students benefit from project-based environments in which they actively construct new meanings based on their existing knowledge of a subject. Some research suggests that students with ADHD do better in environments that are active, self-paced, and hands-on (McGuinness, 1985). Video games and computers are powerful teaming tools for many of these children. In fact, their high-speed behavior and thinking lend themselves quite well to such cutting-edge technologies as hypertext and multimedia (Armstrong, 1995).

Finally, interventions need to go beyond strategies such as smiley faces, points, and medications, and reflect a full sense of the child’s true nature.

Article originally posted at ICPA.org.

U.S. Government Overspending in the 2000s

excerpt from High Alert: How the Internet Reformation is causing a financial hurricane – and how to profit from it:

U.S. Government Overspending in the 2000s:

• $23 billion on pork (grants to the Rock and Roll Hall of Fame, bridges to nowhere, etc.)

• $20 billion in unspecified overpayments. (2001)

• $3.3 billion in overpayments from the Department of Housing and Urban Development, over 10% of the department’s total budget. (2001)

• $100 million on unused Defense Department tickets.

• $2 billion to farmers to not farm their land.

• $12 billion to $30 billion on farm subsidies to wealthy farmers and agribusiness.

• $60 billion on corporate welfare versus $43 billion on homeland security.

• Millions in unnecessary public works projects from Army Corps of Engineers.

• $600 million in food stamp overpayments.

• $120 million school lunch overpayments.

• $800 million veterans program overpayments.

• $1 billion from poor tracking of student loan recipients.

• $7 billion owed by Medicare contractors to the federal government.

• A White House review of just a sample of the federal budget identified $90 billion spent on programs deemed ineffective, marginally adequate, or operating under a flawed purpose or design.

• The Congressional Budget Office published a “Budget Options” book identifying $140 billion in potential spending cuts.

Embracing New Information

by Madisyn Taylor – ICPA.org:

When taking in new information, always use your own intuition to see how the information feels to you. Living in an information age, it is easy to become overwhelmed by the constant influx of scientific studies, breaking news and even spiritual revelations that fill our bookshelves, radio waves and in-boxes. No sooner have we decided what to eat or how to think about the universe than a new study or book comes out, confounding our well-researched opinion. After a while, we may be tempted to dismiss or ignore new information in the interest of stabilizing our point of view. This is understandable—but rather than closing down, we might try instead to remain open and allow our intuition to guide us.

For example, contradictory studies concerning foods that are good for you and foods that are bad for you are plentiful. At a certain point, though, we can feel for ourselves whether coffee or tomatoes are good for us or not. The answer is different for each individual, which is something that a scientific study can’t quite account for. All we can do is take in the information and process it through our own systems of understanding. In the end, only we can decide what information, ideas and concepts we will integrate. Remaining open allows us to continually change and shift by checking in with ourselves as we learn new information. It keeps us flexible and alert, and while it can feel a bit like being thrown off balance all the time, this openness is essential to the process of growth and expansion.

Perhaps the key is realizing that we are not going to finally get to some stable place of having it all figured out. Throughout our lives we will encounter new information, integrate it, and re-stabilize our worldview. But as soon as we reach some kind of stability, it will be time to open again to new information, which is inherently destabilizing. If we think of ourselves as surfers riding the incoming waves of information and inspiration, always open and willing to attune ourselves to the next shift, we will see how blessed we are to have this opportunity to play on the waves…and, most of all, to enjoy the ride.

Article originally posted at ICPA.org.

The Folly of the Fed’s Central Planning

by Ron Paul – Ron Paul Institute for Peace and Prosperity:

Over the last 100 years the Fed has had many mandates and policy changes in its pursuit of becoming the chief central economic planner for the United States. Not only has it pursued this utopian dream of planning the US economy and financing every boondoggle conceivable in the welfare/warfare state, it has become the manipulator of the premier world reserve currency.

As Fed Chairman Ben Bernanke explained to me, the once profoundly successful world currency – gold – was no longer money. This meant that he believed, and the world has accepted, the fiat dollar as the most important currency of the world, and the US has the privilege and responsibility for managing it. He might even believe, along with his Fed colleagues, both past and present, that the fiat dollar will replace gold for millennia to come. I remain unconvinced.

At its inception the Fed got its marching orders: to become the ultimate lender of last resort to banks and business interests. And to do that it needed an “elastic” currency. The supporters of the new central bank in 1913 were well aware that commodity money did not “stretch” enough to satisfy the politician’s appetite for welfare and war spending. A printing press and computer, along with the removal of the gold standard, would eventually provide the tools for a worldwide fiat currency. We’ve been there since 1971 and the results are not good.

Many modifications of policy mandates occurred between 1913 and 1971, and the Fed continues today in a desperate effort to prevent the total unwinding and collapse of a monetary system built on sand. A storm is brewing and when it hits, it will reveal the fragility of the entire world financial system.

The Fed and its friends in the financial industry are frantically hoping their next mandate or strategy for managing the system will continue to bail them out of each new crisis.

The seeds were sown with the passage of the Federal Reserve Act in December 1913. The lender of last resort would target special beneficiaries with its ability to create unlimited credit. It was granted power to channel credit in a special way. Average citizens, struggling with a mortgage or a small business about to go under, were not the Fed’s concern. Commercial, agricultural, and industrial paper was to be bought when the Fed’s friends were in trouble and the economy needed to be propped up. At its inception the Fed was given no permission to buy speculative financial debt or U.S. Treasury debt.

It didn’t take long for Congress to amend the Federal Reserve Act to allow the purchase of US debt to finance World War I and subsequently all the many wars to follow. These changes eventually led to trillions of dollars being used in the current crisis to bail out banks and mortgage companies in over their heads with derivative speculations and worthless mortgage-backed securities.

It took a while to go from a gold standard in 1913 to the unbelievable paper bailouts that occurred during the crash of 2008 and 2009.

In 1979 the dual mandate was proposed by Congress to solve the problem of high inflation and high unemployment, which defied the conventional wisdom of the Phillips curve that supported the idea that inflation could be a trade-off for decreasing unemployment. The stagflation of the 1970s was an eye-opener for all the establishment and government economists. None of them had anticipated the serious financial and banking problems in the 1970s that concluded with very high interest rates.

That’s when the Congress instructed the Fed to follow a “dual mandate” to achieve, through monetary manipulation, a policy of “stable prices” and “maximum employment.” The goal was to have Congress wave a wand and presto the problem would be solved, without the Fed giving up power to create money out of thin air that allows it to guarantee a bailout for its Wall Street friends and the financial markets when needed.

The dual mandate was really a triple mandate. The Fed was also instructed to maintain “moderate long-term interest rates.” “Moderate” was not defined. I now have personally witnessed nominal interest rates as high as 21% and rates below 1%. Real interest rates today are actually below zero.

The dual, or the triple mandate, has only compounded the problems we face today. Temporary relief was achieved in the 1980s and confidence in the dollar was restored after Volcker raised interest rates up to 21%, but structural problems remained.

Nevertheless, the stock market crashed in 1987 and the Fed needed more help. President Reagan’s Executive Order 12631 created the President’s Working Group on Financial Markets, also known as the Plunge Protection Team. This Executive Order gave more power to the Federal Reserve, Treasury, Commodity Futures Trading Commission, and the Securities and Exchange Commission to come to the rescue of Wall Street if market declines got out of hand. Though their friends on Wall Street were bailed out in the 2000 and 2008 panics, this new power obviously did not create a sound economy. Secrecy was of the utmost importance to prevent the public from seeing just how this “mandate” operated and exactly who was benefiting.

Since 2008 real economic growth has not returned. From the viewpoint of the central economic planners, wages aren’t going up fast enough, which is like saying the currency is not being debased rapidly enough. That’s the same explanation they give for prices not rising fast enough as measured by the government-rigged Consumer Price Index. In essence it seems like they believe that making the cost of living go up for average people is a solution to the economic crisis. Rather bizarre!

The obsession now is to get price inflation up to at least a 2% level per year. The assumption is that if the Fed can get prices to rise, the economy will rebound. This too is monetary policy nonsense.

If the result of a congressional mandate placed on the Fed for moderate and stable interest rates results in interest rates ranging from 0% to 21%, then believing the Fed can achieve a healthy economy by getting consumer prices to increase by 2% per year is a pie-in-the-sky dream. Money managers CAN’T do it and if they could it would achieve nothing except compounding the errors that have been driving monetary policy for a hundred years.

A mandate for 2% price inflation is not only a goal for the central planners in the United States but for most central bankers worldwide.

It’s interesting to note that the idea of a 2% inflation rate was conceived 25 years ago in New Zealand to curtail double-digit price inflation. The claim was made that since conditions improved in New Zealand after they lowered their inflation rate to 2% that there was something magical about it. And from this they assumed that anything lower than 2% must be a detriment and the inflation rate must be raised. Of course, the only tool central bankers have to achieve this rate is to print money and hope it flows in the direction of raising the particular prices that the Fed wants to raise.

One problem is that although newly created money by central banks does inflate prices, the central planners can’t control which prices will increase or when it will happen. Instead of consumer prices rising, the price inflation may go into other areas, as determined by millions of individuals making their own choices. Today we can find very high prices for stocks, bonds, educational costs, medical care and food, yet the CPI stays under 2%.

The CPI, though the Fed currently wants it to be even higher, is misreported on the low side. The Fed’s real goal is to make sure there is no opposition to the money printing press they need to run at full speed to keep the financial markets afloat. This is for the purpose of propping up in particular stock prices, debt derivatives, and bonds in order to take care of their friends on Wall Street.

This “mandate” that the Fed follows, unlike others, is of their own creation. No questions are asked by the legislators, who are always in need of monetary inflation to paper over the debt run up by welfare/warfare spending. There will be a day when the obsession with the goal of zero interest rates and 2% price inflation will be laughed at by future economic historians. It will be seen as just as silly as John Law’s inflationary scheme in the 18th century for perpetual wealth for France by creating the Mississippi bubble – which ended in disaster. After a mere two years, 1719 to 1720, of runaway inflation Law was forced to leave France in disgrace. The current scenario will not be precisely the same as with this giant bubble but the consequences will very likely be much greater than that which occurred with the bursting of the Mississippi bubble.

The fiat dollar standard is worldwide and nothing similar to this has ever existed before. The Fed and all the world central banks now endorse the monetary principles that motivated John Law in his goal of a new paradigm for French prosperity. His thesis was simple: first increase paper notes in order to increase the money supply in circulation. This he claimed would revitalize the finances of the French government and the French economy. His theory was no more complicated than that.

This is exactly what the Federal Reserve has been attempting to do for the past six years. It has created $4 trillion of new money, and used it to buy government Treasury bills and $1.7 trillion of worthless home mortgages. Real growth and a high standard of living for a large majority of Americans have not occurred, whereas the Wall Street elite have done quite well. This has resulted in aggravating the persistent class warfare that has been going on for quite some time.

The Fed has failed at following its many mandates, whether legislatively directed or spontaneously decided upon by the Fed itself – like the 2% price inflation rate. But in addition, to compound the mischief caused by distorting the much-needed market rate of interest, the Fed is much more involved than just running the printing presses. It regulates and manages the inflation tax. The Fed was the chief architect of the bailouts in 2008. It facilitates the accumulation of government debt, whether it’s to finance wars or the welfare transfer programs directed at both rich and poor. The Fed provides a backstop for the speculative derivatives dealings of the banks considered too big to fail. Together with the FDIC’s insurance for bank accounts, these programs generate a huge moral hazard while the Fed obfuscates monetary and economic reality.

The Federal Reserve reports that it has over 300 PhD’s on its payroll. There are hundreds more in the Federal Reserve’s District Banks and many more associated scholars under contract at many universities. The exact cost to get all this wonderful advice is unknown. The Federal Reserve on its website assures the American public that these economists “represent an exceptional diverse range of interest in specific area of expertise.” Of course this is with the exception that gold is of no interest to them in their hundreds and thousands of papers written for the Fed.

This academic effort by subsidized learned professors ensures that our college graduates are well-indoctrinated in the ways of inflation and economic planning. As a consequence too, essentially all members of Congress have learned these same lessons.

Fed policy is a hodgepodge of monetary mismanagement and economic interference in the marketplace. Sadly, little effort is being made to seriously consider real monetary reform, which is what we need. That will only come after a major currency crisis.

I have quite frequently made the point about the error of central banks assuming that they know exactly what interest rates best serve the economy and at what rate price inflation should be. Currently the obsession with a 2% increase in the CPI per year and a zero rate of interest is rather silly.

In spite of all the mandates, flip-flopping on policy, and irrational regulatory exuberance, there’s an overwhelming fear that is shared by all central bankers, on which they dwell day and night. That is the dreaded possibility of DEFLATION.

A major problem is that of defining the terms commonly used. It’s hard to explain a policy dealing with deflation when Keynesians claim a falling average price level – something hard to measure – is deflation, when the Austrian free-market school describes deflation as a decrease in the money supply.

The hysterical fear of deflation is because deflation is equated with the 1930s Great Depression and all central banks now are doing everything conceivable to prevent that from happening again through massive monetary inflation. Though the money supply is rapidly rising and some prices like oil are falling, we are NOT experiencing deflation.

Under today’s conditions, fighting the deflation phantom only prevents the needed correction and liquidation from decades of an inflationary/mal-investment bubble economy.

It is true that even though there is lots of monetary inflation being generated, much of it is not going where the planners would like it to go. Economic growth is stagnant and lots of bubbles are being formed, like in stocks, student debt, oil drilling, and others. Our economic planners don’t realize it but they are having trouble with centrally controlling individual “human action.”

Real economic growth is being hindered by a rational and justified loss of confidence in planning business expansions. This is a consequence of the chaos caused by the Fed’s encouragement of over-taxation, excessive regulations, and diverting wealth away from domestic investments and instead using it in wealth-consuming and dangerous unnecessary wars overseas. Without the Fed monetizing debt, these excesses would not occur.

Lessons yet to be learned: