Booms and Busts

We define a bubble as the outcome of activities that have emerged on the back of the loose monetary policy of the central bank. In the absence of monetary pumping, these activities would not have emerged.

In the present article I am not taking a stand on whether price inflation will be high or low in 2008.However I will say this: If you are revising your inflation forecasts downward because of your expectation of sluggish economic growth, you might want to rethink that logic.

It is paramount for a free society to ensure, in the marketplace of ideas, that only good ones, based on sound theory and history, take root.

Agriculture has been left in the dust, but it won't stay there.

The increase in monetary pumping however sets in motion a new boom-bust cycle. Also, once economic activity starts to recover on its own (as a result of the improvement in the pool of real funding) any "help" from the Fed can only slow down the process of recovery.

Count me out of the Bernanke revolution.

So it was in 1920 and 1921. The government didn't intervene and voila normalcy returned.

We define a bubble as the outcome of activities that have emerged on the back of loose monetary policy of the central bank.

If a thing has to be used as a medium of exchange, public opinion must not believe that the quantity of this thing will increase beyond all bounds. Inflation is a policy that cannot last.