The Adverse Effects
of Monetary Stimulation
Alasdair Macleod explains how the rapid expansion of money printing leads to an effect opposite to that which is intended .. in other words - it produces a fall, not a rise, in economic activity .. The effect starts early in the recovery phase of the credit cycle .. "It is the commonest fallacy in economics today that monetary inflation stimulates activity. Instead, it benefits the few at the expense of the majority. The experience of all currency-based inflations is just that, and the worse the inflation the more the majority of the population is impoverished .. The problem for central banks is that the alternative to maintaining an increasing pace of monetary growth is to risk triggering a widespread debt crisis involving both over-indebted governments and also over-extended businesses and home-owners. This was why the concept of tapering, or putting a brake on the rate of money creation, destabilized worldwide markets and was rapidly abandoned. With undercapitalized banks already squeezed between bad debts and depositor liabilities, there is the potential for a cascade of financial failures. And while many central bankers could profit by reading and understanding this article, the truth is they are not appointed to face up to the reality that monetary inflation is economically destructive, and that escalating currency expansion taken to its logical conclusion means the currency itself will eventually become worthless."
LINK HERE to the essay 
No comments:
Post a Comment