Quantitative easing opened a Pandora’s box that will not be closed until massive inflation spreads worldwide. Only when people quit accepting the digital money that central banks spew will it end. However, the end may be far, far away. Traditionally, central banks created money “out of thin air” to finance wars by buying new government
“First they ignore you, then they laugh at you, then they fight you, then you win.” — Mahatma Gandhi Mahatma Gandhi successfully sought the overthrow of tyrannical British rule in India via non-violent civil protests. In doing so, the above quote became synonymous with his name. Basically, Gandhi’s quote outlines how new ideas are received
Wednesday the Federal Open Market Committee (FOMC) gave no date for an interest rate hike, leaving analysts and economists speculating as to when the long anticipated .25 percent increase in the federal funds rate, which now officially stands at “zero to .25 percent,” will come. Following the Fed’s official statements issued after FOMC meetings has
Greece remaining in the eurozone monetary system and keeping the euro as its currency appears less likely at the end of every marathon meeting of eurozone prime ministers and Greek representatives. Many analysts are of the opinion that dumping the euro and going back to the drachma would alleviate some of Greece’s pain. Of course,
Belatedly, Zimbabwe recently declared its currency, the Zimbabwe dollar, worthless. The marketplace recognized the worthlessness of the Z$ in 2009, when the Zimbabwe government adopted the US dollar as its main currency. Account holders with Z$ balances of zero to Z$175 quadrillion will be paid a flat US$5. A “quadrillion” has fifteen zeros.
In a statement that could not have been more blunt, last week the IMF told Japan that it needs to print more money to ensure that its economy will not slip into recession. Specifically, the IMF wants the Bank of Japan to push inflation to 2 percent. Japan’s inflation rate is near zero.
In a move that is supposed to fillip economic activity, China’s central bank cut interest rates again. While interest rates in China are not at near zero levels as in the US, the move further signifies that the Bank of China has fully embraced Keynesian economics, which have not stimulated economic activity in the US
While speculation is spreading that the Bank of Japan may increase its bond-buying program, with the dual goals of increasing economic activity and filliping the rate of inflation to 2 percent, influential members of the money establishment are asking “Is 2 percent inflation high enough?”
Establishment economic thinking is that the “right” rate of inflation is 2%. Thoughts on this position can be found here: The Goal of 2% Inflation, Rethought — New York Times. Japan is falling far short of 2% inflation, despite the Bank of Japan buying ¥80 trillion worth of bonds each month. Analysts are now speculating
Around the world, central banks have joined in fighting a common enemy: lower prices. But, when did lower prices become the enemy?