The United States currency has only really weakened relative to the yen and the euro, but that depends on optimistic expectations of a European and Japanese economic recovery.
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.
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.
It is often claimed that inflation reduces the true burden of debt. This is true for existing debt, but those who advocate it as a remedy for government indebtedness fail to understand that it also increases the cost of the government’s future debt.
Central bankers are saying two things at once. First, they say that negative interest rates are a natural historical development. But then they say negative rates are an essential tool central banks are using to manipulate the economy.
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.
According to Keynesians, wealth effects result from money creation, and they have a beneficial impact. The Keynesians are right that wealth effects exist. But they're wrong about who benefits.
