Be seeing you!

Via Sean Corrigan’s  Et in Academia ego » The Cobden Centre, following a consideration of the predicament of Greece:

So, rather than relying on the snake oil salesmen to tell us how we should think, let us go back to the basics for a moment to see if they will help clarify the situation in which we find ourselves today.

As we never cease to point out, the immediate effect of monetary injections is to reinvigorate business revenue streams and—at first—profits. And so it has been through the Great Reflation.

Thereafter, however, the monetary influx means prices begin to rise—stubbornly not in the sectors whose overbuilding and later collapse are the intended welfare recipients—and as their changes become more unpredictable, they both dilute the money’s growth-inducing potency and swamp out the signals conveyed by prices, signals upon which all economic decisions—whether taken by producers or consumers—must be based.

Unless the monetary authorities then abandon all sense of responsibility, their actions—however reluctantly taken—to counter this will tend to reduce real money supply, either actively (by slowing its nominal growth), or passively (by not adding sufficient to offset its declining purchasing power).

At this point, those whose continued expansion—and perhaps even their very continuance—in business has become too heavily dependent on the maintenance stimulus rush will again start to falter.

This last neatly describes conditions in many of the major economic zones of the world, with the current exception—thanks to the lunacy of QE-II—of the US.

I recommend the full article.

Via Material Evidence » The Cobden Centre, more on the false impression of prosperity created by erroneous monetary and fiscal policy:

Without stopping to rehearse the entire thesis (laid out most recently in the last two editions of Tangible Ideas, viz., ‘Lord Timon’s Purse’ – oriented towards money and credit – and ‘Goodbye to All That’– which dealt with their real–side impact), this ‘bullishness’ may have imparted the impression that we have something of a schizophrenic mindset since, in all other respects, our outlook has been jaundiced, to say the least. To the contrary, the two are not at all incompatible, but, rather, interrelated, since what we have all along said would drive a rapid rebound in asset prices would be continued central bank laxity, supercharged by the monetization of soaring government deficits and magnified by the market’s utter misunderstanding of the nature of the ‘recovery’ this has engendered as the liquidity crisis of ‘Snowball Earth’ has partially thawed to a still glacial Little Ice Age of misallocated capital and sorely impaired balance sheets.

The Cobden Centre has been established to promote honest money, free trade and peace. We recognize that stable systems of private property and exchange are a prerequisite to a sound economy and we are promoting reforms which would extricate us from our present difficulties.