Inflationary expectations and US economic recovery
“The Economist on July 3, 2012 suggested that it is possible to revive the US economy by means of monetary pumping. They believe that by means of loose monetary policy the Fed could raise inflation expectations. Consequently, people would speed up buying at present knowing that goods will be much more expensive in the future. This in turn would speed up the pace of economic expansion.
“On the contrary, at the Cobden Centre we hold that the Fed’s loose monetary policy will lead to the consumption of capital, thereby inflicting damage to the foundation of the economy. Consequently, the ability of the US economy to stage a meaningful expansion will be diminished”.
Dr Frank Shostak is a leading Austrian economist and director of Applied Austrian School Economics Ltd, which aims to assess the direction of various markets using the Austrian School methodology. AASE aims to make Austrian economics accessible to businessmen.
On the Cobden Centre website he writes:
“Doesn’t additional easing amount to little more than pushing on a string? The Economist is of the view “it doesn’t”. By lifting monetary pumping the Fed could raise inflation expectations, which in turn is going to raise inflation in the present, argues The Economist.
“Consequently, this is going to lift the present demand for goods and services. (People will speed up buying at present knowing that goods will be much more expensive in the future). The increase in present demand for goods and services will speed up the pace of economic expansion – so it is suggested by The Economist.
Note that the essence of this way of thinking, which is accepted by most economists including the Fed’s Chairman Bernanke, is that what is required to revive economic growth is to boost the demand for goods and services”.
The core truth in Dr. Frank Shostak’s article here is this. He says :
“In the real world people pay for goods and services by means of the goods and services they are producing”.
– (these are called jobs)
“Hence the more is produced the more goods people can have for themselves in order to support their life and well being”.
– (because they have wages in their pockets and can save a bit after buying essentials. What they save is a store of wealth which can be lent to others to create more jobs)
“What permits the increase in the production of goods and services is the availability of a suitable structure of production. To secure such a structure various individuals that are employed in the maintenance and the enhancement of the production structure, or the infrastructure, must be supported”.
– (this translates into ‘do everything possible to prevent unemployment. At all costs keep people working. Never think unemployment is ‘a good thing for the economy’ as some demented economists sometimes think.
Everyone wants to possess a degree of ‘wealth’.
The mirror image of the old adage “money can buy anything’ is that virtually everyone wants to work to obtain a suitable degree of wealth. All you have to do is have a means of persuading people to work. This means of persuasion is to give them something they want (money – which is just a means of exchange to enable every kind of trading, instead of using primitive barter) to do something useful for their employer.
The worker can then take this money he has just been paid for working hard for his employer making something sufficiently useful other people want to buy, and go and spend it on what he needs to buy – and save a bit for a rainy day.
This simple process is the economy; made to sound immensely complicated by ‘economists’ who make a living interfering in it, talking utter nonsense and causing incredible damage in the process.
Oh, and just one little thing which might indicate what a pig’s ear ‘economists’ and governments (and bankers !) make of our lives is the simple truth that there are, and always will be, a completely unlimited number of ‘jobs’ out there in the Universe that will always need doing. They are just there for the taking.
Figuratively speaking, everyone wants a pink Rolls Royce and a yacht; and when they have those, they want their very own spaceship to explore the Universe. And desires like these require lots of workers doing lots of jobs to meet this insatiable demand for ‘wealth’.
More realistically, there are enough jobs available on planet earth right now to usefully employ every human being willing and able to work towards eradicating ignorance and poverty, war and pestilence, and then to provide comfort and security for every man, woman and child on earth.
That’s a lot of jobs screaming out to be done by willing workers who are all out there in their countless millions just waiting in desperation for the opportunity to be able to work both to earn a useful wage for themselves and contribute to the greater good of mankind.
And when all that is achieved, and it appears there might be fewer jobs around for people to do, fear not. Because a very, very big job indeed looms on Mankind’s distant horizon which will take the monumental efforts of centuries of hard work for millions of people.
Ultimately, we need to learn how to ensure our long term survival of all the effort already put into our very existence, by escaping the ‘surly bonds of Earth’ to some other home far beyond the Solar system which is remorselessly heading towards it’s own extinction, taking us with it.
We need to put a lot of work in to ensure the long term survival of the human race – the sooner the better – because it is a very, very, very big job, enough to keep everyone busy for a very long time.
Guaranteed jobs for all from here to eternity !
Meanwhile, the reality is that unemployment, war, pestilence and poverty ebb and flow in a choking, filthy tide of ignorance and greed as it destroys everything in it’s path.
There are enough jobs available for everyone alright. It is just that incredibly stupid people stop it from happening.