[WS:] Sure. For one thing, it would wipe out most of my retirement savings, so it must be bonkers :)
But let's play a devil's advocate and put undesirable social consequences aside for a while. If gov monetary policy results in inflation of asset value, this does little to stimulate the economy - as the government stimulus sits unproductively. There seem to be only two ways out of this situation - gov switching to direct purchases (fiscal policy) - as Richard Koo and Krugman advocate, and deflation of assets to the point that it is more profitable to invest in productive activities instead. Since the former is politically toxic, the latter seems to be the only way out.
>From that pov, deflation is not bonkers - it is a real solution - one
that is politically preferable by neo-libs. I do not think these
people will be swayed by the argument pointing to dire social
consequences of their solution - they do not give a flying fuck as
long as their net worth appreciates. They are the new l'etat c'est
moi aristocracy - they only thing that can get the idea of
self-importance out of their heads is the guillotine.
Wojtek
On Fri, Oct 22, 2010 at 7:37 AM, Doug Henwood <dhenwood at panix.com> wrote:
>
> On Oct 21, 2010, at 11:35 PM, Jeffrey Fisher wrote:
>
>> Maybe I wasn't clear about this, or maybe it's an obnoxious question, and I
>> should just go read the book, but I'm not sure that would help me. I'm
>> trying to understand, *if* the guy accurately predicted the bust, do we have
>> a way of explaining how his paradigm is wrong but his results were right
>> (this time)?
>
> I'll be charitable and say that Austrian economics has a point or two. Extended credit booms end in sadness. But where I think they're wrong is seeing deficit spending in a bust like this as also inflationary. He sees/they see no risk in deflation - recall that he said that deflation is a good thing. That's bonkers.
>
> Doug
> ___________________________________
> http://mailman.lbo-talk.org/mailman/listinfo/lbo-talk
>