Venitist J.D. Foster points out a mountain of excess bank reserves, now totaling more than $1 trillion, presents a real risk of rapid inflation if it is released too quickly into credit markets. The Federal Reserve appears to have the necessary tools to control the outflow of excess reserves, thereby restraining inflation. However, whether the Fed will use those tools wisely is an entirely separate issue. A related concern is the Fed's timing and aggressiveness in withdrawing its traditional monetary support for the economy by raising the Fed funds rate.
Global Tax Revolt(globaltaxrevolt@aol.com
Frequent comments by Fed officials and others regarding the downward pressure on inflation from persistent excess capacity in the economy suggest the Fed may be significantly tardy in withdrawing monetary support. If so, the Fed is risking the return of stagflation, high unemployment and high inflation.
Central bank's artificial creation of credit is the culprit in the business cycle. As the boom turns into bust, the economy tries to readjust itself into a configuration that conforms to consumer preferences. That is why it is so essential for government to stay entirely out of the adjustment process, because arbitrary government behavior can only delay this necessary and healthy process. Wages and prices need to be free to fluctuate, so labor and other resources can be swiftly shifted away from bloated, bubble sectors of the economy and into sustainable sectors of the economy where consumers want them.
Bailouts obstruct that process by preventing the reallocation of capital into the hands of firms that genuinely cater to consumer demand, and by propping up instead those firms that have deployed resources in ways that do not conform to consumer preferences. Fiscal and monetary stimulus do nothing to address the imbalances in the economy, and indeed only perpetuate them.
Foster notes that having suffered a deep recession and barely averted a thorough and crushing collapse of the global financial system, the U.S. economy continues to underperform badly. Capacity utilization is down about 10 percent, and the unemployment rate, hovering around 10 percent, is expected to remain elevated for years. Consequently, credible though waning residual concerns about near-term deflation persist.
There has been much discussion of moral hazard in connection with the flurry of bailouts that began in 2008. Moral hazard refers to people's readiness to act with an artificially elevated level of risk tolerance because they believe that any losses they may incur will be borne by other people. Hence the bailouts will tend to make major market actors even less likely to behave prudently in the future, since if they believe they are likely to be considered too big to fail, they have more reason than ever to believe that they will not be allowed to go out of business, and therefore that they may continue to make risky bets.
Against this background of economic weakness, inflation may appear an odd concern, but it is not. Inflation is always and ultimately a monetary phenomenon. At some point, inflation's potential, created by past monetary policy, will be realized regardless of the state of the economy, either through offsetting policies or through a revival of potentially rapid inflation.
Foster claims the actions of central banks around the world, especially the Federal Reserve, successfully stabilized the financial system in part through massive injections of reserves into the credit system. These reserves, which largely sit apparently idle on central bank balance sheets, assure financial institutions that they have the liquidity needed in a highly stressed financial environment. These reserves, now totaling more than $1 trillion, present the substance of the very real risk of rapid inflation if they are released too quickly into credit markets.
In addition, even if the Fed contains these excess reserves the economy faces a serious risk of inflation if the Fed is late in removing its traditional support for a weak economy. Before inflation becomes a reality, and likely well before the economy has established a firm footing, the Fed needs to address this inflation threat by beginning a difficult and judicious unwinding of the monetary stimulus that it applied since early in 2008, part of the Fed's so-called exit strategy. If the Fed errs, then not only inflation, but also another bout of stagflation, are likely.
The very existence of a central bank such as the Federal Reserve aggravates, indeed institutionalizes, moral hazard. Since there is no physical limitation on the creation of paper money, firms know that no natural constraint exists on the power of the central bank to bail them out of any serious trouble. The Central Put is the implied promise that the central bank would intervene to assist the financial sector in the event of a serious downturn. No one has a right to be surprised when market actors behave accordingly.
There were many skeptics at the beginning of euro. Since then, the euro has experienced 11 successful years. However, the current crisis has shown that we are all moving in unknown terrain. For instance, the central banks have had to adopt measures that anyone would have considered to be impossible only two years ago. But all market players and currencies have been put to the same test since the Lehman Brothers bankruptcy which led to the tsunami that hit Europe.
Basil Venitis, twitter.com/Venitis, asserts that when an economy suffers from erectile dysfunction, via-grab does not work, but only via-cut. The via recommended is to cut taxes, not grab more taxes. There are limits to how much government can tax before it kills the host. Even worse, when government attempts to subsidize prices, it has the net effect of inflating them instead. The economic reality is that you cannot distort natural market pressures without unintended consequences. Market forces would drive prices down. Government meddling negates these pressures, adds regulatory compliance costs and layers of bureaucracy, and in the end, drives prices up.
Individuals and businesses see tremendous opportunities for starting new businesses, investing, hiring new workers, and expanding into new markets. Many are holding back, however, due to concerns about the economy, while others are holding back due to concerns about the threatening policies of government, and others are holding back because existing tax and regulatory burdens are already excessive. For private-sector job creation to jumpstart, prerequisite is to reduce drastically taxes and regulation.
It's your venitist duty to avoid and evade taxes all the way! Venitis points out that tax competition between jurisdictions holds down the cancer of government, and all people experience more opportunities and more wealth. If businesses and individuals are discouraged from investing outside their own jurisdictions, they will simply choose to work less and take no major business risks. All antivenitist governments are corrupt, and without the last bastions of freedom, aka taxhavens, enforcing financial privacy, citizens would have no place to protect their financial assets from kleptocrats, kidnappers, extortionists, blackmailers, and thugs. Evade taxes now as much as you can! Starve the beast and join the Global Tax Revolt, http://groups.yahoo.com/group/
Δεν υπάρχουν σχόλια:
Δημοσίευση σχολίου