Booms and Busts

NASCAR exemplifies these stagflationary times.

It’s time that we question the very foundations of this war on recession. The recession is a regrettable but inevitable backlash against a boom that was not justified by the fundamentals.

Oil is over $100 per barrel and gold is approaching $1000 per ounce.

Computational neuroscientists would add that not only do the projects appear profitable on paper but also that dopamine is released into the brains of entrepreneurs as they anticipate future profits.

So says Mike Whitney, a “well respected freelance writer living in Washington st

Now, some of the locals are feeling the pain as lady luck, bad math and bad judgment are punishing them.

At the end of the day, inflation is a serious threat to freedom. The majority of the people, suffering badly from inflation, would most likely blame the free market for their plight, rather than blame the central bank for the debasing of the currency.

The problem for free-market economists is that their policy recommendations at the dawn of recession are not too sexy to the political mindset. They involve either doing nothing to hinder price adjustments, or actively removing extra-market barriers to price adjustments that already exist. This often involves short-term pain in exchange for long-term solutions, when politics rewards short-term solutions that result in long-term pain.

Last Tuesday, January 22, 2008, the US central bank lowered its federal funds rate target by a hefty 0.75% to 3.5%.