Eventually, loose monetary policy will damage real savings to the point that the economy can no longer sustain sufficient economic growth. At that point, it will become clear that money printing can't create economic growth.
The mother of all monetary stimuli could turn out to be worse than a dud—a catalyst to a slide into further recession just as the supply shock of pandemic recedes.
Just how is this magic created? The spurring of demand in the midst of a covid-created depression. The wizards at the Fed and Treasury have created an intoxicating frothy brew for stock and home buyers alike.
Europe's path to long-term stagnation should serve as a reminder for the United States, again, of why it is not advisable to follow the eurozone policies. The results are invariably disastrous.
Despite double-digit unemployment rates, banks are keeping loan-loss provisions low, no doubt assuming Uncle Sam will keep everyone’s boat afloat. But all good things come to an end.
Since government creates nothing itself, all interventions are nothing more than transfers of wealth for the benefit of some and the destruction of wealth for everyone else.
Our high levels of malinvestment mean that negative interest rates will not have the steroidal effect that's hoped for. But they will deliver another few years of subpar debt-fueled economic activity.
The crisis we faced in 2008 has not gone away, as we failed to heed its warning to change course and reduce debt levels. Instead, it has become bigger and more dangerous.
Economic growth results from increasing production, and the money supply is always sufficient to foster exchange. The boom-bust cycle only occurs when production is distorted by a growing money supply.
