Does more consolidation and fewer leading businesses, which seems to be our direction, lead to more productivity?
No. The only essential thing that people need is confidence. What kills confidence is fear and in economics inflation is the great fear. I should say it's the fear held by people.
The central bank fears deflation because they can't control deflation. They can't push on a string. Of course, neither can they control inflation without stopping interventionism, so they concede a low rate of inflation in order to be able to go on with the pretense that they do good to the world.
In the last 20 years they have come to fear inflation almost as much as deflation because in the last go-around, inflation almost led to US financial collapse with the likely result of the FED loosing its independence. A senator, Falce, I think, mentioned that today in AG's review. It's ironic that they have to do one thing and that is they can't let Congress decide monetary policy, or maybe that's better, because the resulting chaos would lead back to the default which is a free market in money!
The FED's number one duty is to preserve the integrity of money. Maybe that's its only duty. Until the '60s the FED did not attempt to engineer prosperity. By trying to do so they have created the very thing they fear, and created among the people a fear of destruction. All the FED needs to do is maintain an environment of zero inflation. 2.5% inflation does not meet this goal and is not acceptable because it always evolves into structural inflation. ALWAYS. FED disagrees. They think there exists the optimal policy that will achieve the ideal and it's their solemn duty to find it. It's an illusion and FED bungles its way from mistake to mistake as evidenced by the greatest stock market crash in history.
If FED maintained stable prices, they wouldn't need to worry about productivity or many of the other a posteriori variables that causes them to shoot themselves and us in the foot. AG has stated as much as have many other leading economists for decades. |
