By protecting banks from the costs of poor investment decisions, central banks encourage further risk taking and malinvestment. They also prevent liquidation, which brings failed businesses' assets to the market at bargain prices, allowing new businesses to emerge from the detritus.
When governments and central banks announce massive stimulus packages at the very beginning of a crisis, they bet on a speedy recovery and a return to normal as if nothing had happened. This is far from the case.
When governments and central banks announce massive stimulus packages at the very beginning of a crisis, they bet on a speedy recovery and a return to normal as if nothing had happened. This is far from the case.
Accad and Koka interview Ryan McMaken.
From New York to London to Brussels to Tokyo, central banks in the last two weeks have embraced a wide variety of extraordinary inflationary measures to prop up insolvent banks and governments.
The Fed's portfolio is now 35 percent larger from the time the Fed promised to "taper" back its portfolio and "normalize." It is increasingly clear that there will not be any normalization. Ever.
The Danish state believes that the nation can avoid economic collapse if the state pays private sector workers' salaries. This, it is thought, will allow private companies to avoid layoffs. But there's a downside.
It is tempting to assume both money supply inflation and price inflation will come soon as the central banks pump new money. But if banks aren't lending because the economy is in disarray, the money supply may actually shrink, and prices may even fall.
With each passing recession, the Fed finds it harder to refuel the last bubble, but the market moves on to the new bubble as the Fed keeps interest rates artificially low.
Bureaucrats cannot conjure wealth from nothing. They only have what they extract from the private sector. Unfortunately, the bureaucrats are now starving the private sector of funding while making government budgets ever larger.
