The whole notion of paying off past investors with the funds of present investors is at the very core of the Social Security system. At least Madoff sought the consent of his investors who let him care for their money based on their own volition. And at least he didn't attempt to defend himself with the claim that he was conducting wise public policy.
Bubble activities are not self-funded; they require money "out of thin air," which is employed to divert real savings to them from wealth generators.
The downward manipulation of the interest rate drives a wedge between the (real) market interest rate and the societal time-preference rate, and therefore wreaks havoc with the economy's intertemporal production structure.
Austrian economists are not fooled, because they reject the idea of empirical data in the validation of theory in the social sciences.
We suggest that inflation is not rises in prices as such but the debasement of money.
Obama's actions have already laid the foundation for a gigantic bubble and a further weakening of economic fundamentals.
If anything, all the rescue packages and all the massive pumping by the Fed has made things much worse as far as the underlying economic bottom line is concerned.
Meanwhile, such a system of "extended liability" for homeowners would have prevented the extra stress on banks caused by negative-equity defaulters. Because these people would know they are paying back the full sum either way, they would instead keep the house and pay back the (albeit, exorbitant when considering the plummeting value of their home) debt over time — perhaps while keeping their home, if they had proof of income.
"The 'paradox of thrift' is actually an essential liquidation process that characterizes economic corrections."
John Maynard Keynes often employed flowery language like “animal spirits” and “liquidity trap” to describe things he did no
