The problem with central banks across the world is that they’re flooding the financial markets with quantitative easing and the prices for stocks are inaccurate and overpriced. Where’s the opinion?
China has been investing in its own real estate for years now and has recently ground down to a six percent growth rate per year, this being the president’s motivation to devalue it’s currency in support of it’s exports.
Now more countries are motivated to devalue their currency for their export’s sake, being that international competition is at the forefront of this issue.
On top of this, the Federal Reserve might raise interest rates in September for the first time since the recession in 2008.
The value of the dollar, relative to its trading nations, will become strong.
But this comparison is incomplete because the system here has been artificially propped up with the Fed’s ability to print money on command, whenever chairwoman Janet L. Yellen deems necessary.
The only reason the Federal Reserve exists today, which it has for almost 102 years, is to stabilize the economy by setting prices and managing recessions when banks are not capable of managing their defaulted loans.
After years of strategizing, the board of governors has not been able to meet their stated objectives with monetary policy.
Their policy to increase the money supply, among other things, is intended to keep the economy at high levels of growth perpetually, which leaves market failure out of the question.
Stabilizing the economy is code for prolonging the inevitable.
A stable economy has unemployment; it uses resources at sub-optimal levels and goes through downturns.
Joseph Schumpeter in 1911 called this creative destruction.
In a recession, the economy is cleansed of enterprises and banks, even, which are least efficient and most careless.
The Federal Reserve will do good to let the markets set its own prices, meaning they should stop what they’re doing.
There is still much to learn about economic processes, but finding myself in a room with these individuals would compel me to demand them to “go back to whatever it was you were doing before you participated in the deterioration of the American economy!”
The depression of 1920 and 1921 “cured itself” because the economy was left alone to its own mechanism.
But there are serious consequences to changing the structure of any economy.
Money supply would contract, employment would rise and it would motivate the people to want the government to give more entitlement aid.
Immediate consequences would soon follow, but the long-term benefits would really allow our future generations to live in a society liberated from all the wrongdoing.
