The financial-market crisis is not over but has grown into a vicious sovereign-debt crisis. Nevertheless, monetary policy makers of the major economies go on to practice the same sort of policy that has led to the crisis. Following the model of inflation targeting, they continue to disregard the quantity of money and the amount and kind of credit creation. As they did before, central bankers cut interest rates as low as they can.
Recently reported in the MIT Technology Review was the results of research modeling billions of interactions between buyers and sellers. The data would appear to undermine the argument used to defend invasive regulation, price-fixing, and anti-trust laws, which operate under the assumption that all inconvenient price increases must be the result of shady conspiracies by industry leaders.
Should profits give way to social or environmental concerns? The results would be disastrous.
Blogger Waldo Jaquith discovers that the isolated man — a nontrading man — cannot make a cheeseburger, even after years of effort. Sadly, the Scientific American writer dismisses the market due to his Malthusian nightmare.
In his New York Times article of January 11, 2012, the Nobel laureate Paul Krugman wrote,
If nothing else, we’ve learned that the liquidity trap is neither a figment of our imaginations nor something that only happens in Japan; it’s a very real threat, and if and when it ends we should nonetheless be guarding against its return — which means that there’s a very strong case both for a higher inflation target, and for aggressive policy when unemployment is high at low inflation.
