Gov bonds

[Guest Lester Weevils]

Thanks 6.8 AR

I do not advocate permanent inflation. Merely explained a reason why some people think that permanent inflation is beneficial.

Regardless whether permanent inflation is good or bad it seems a fact of life. There has been no time in my life free of inflation except very brief panic periods where deflation became the boogy-man. If Fed Reserve and gov policy has long term encouraged inflation in order to force economic participation-- That seems elitist economic diddling "for our own good." I don't appreciate the favor.

Maybe the "use it before you lose it" effect of inflation could eventually improve trade with China? If China forsees US gov bonds as an inflation rip-off, then China could decide to quit selling goods at fire-sale prices. Alternately China could decide to buy USA goods right away with the money, rather than risk US gov bond losses. China would be a fabulous trade partner with truly balanced trade.

Milton Friedman and Ben Bernanke may not be that far apart. They are both monetarists and supposedly Friedman was one of Bernanke's inspirations.

If Friedman had been Fed Reserve Chariman in 2007, it is possible that Friedman may have taken similar actions as Bernanke. Bernanke's actions worry me, but some of Bernanke's thinking is apparently based on Friedman.

I know you don't like wikipedia but I do not quote wikipedia as unimpeachable authority. No source is unimpeachable and nothing is pure gospel. Wikipedia does a pretty good job if you take it with a grain of salt.

Great Depression - Wikipedia, the free encyclopedia

Monetarists, including Milton Friedman and current Federal Reserve System chairman Ben Bernanke, argue that the Great Depression was mainly caused by monetary contraction, the consequence of poor policymaking by the American Federal Reserve System and continued crisis in the banking system. In this view, the Federal Reserve, by not acting, allowed the money supply as measured by the M2 to shrink by one-third from 1929–1933, thereby transforming a normal recession into the Great Depression. Friedman argued that the downward turn in the economy, starting with the stock market crash, would have been just another recession. However, the Federal Reserve allowed some large public bank failures – particularly that of the New York Bank of the United States – which produced panic and widespread runs on local banks, and the Federal Reserve sat idly by while banks collapsed. He claimed that, if the Fed had provided emergency lending to these key banks, or simply bought government bonds on the open market to provide liquidity and increase the quantity of money after the key banks fell, all the rest of the banks would not have fallen after the large ones did, and the money supply would not have fallen as far and as fast as it did. With significantly less money to go around, businessmen could not get new loans and could not even get their old loans renewed, forcing many to stop investing. This interpretation blames the Federal Reserve for inaction, especially the New York branch.

One reason why the Federal Reserve did not act to limit the decline of the money supply was regulation. At that time, the amount of credit the Federal Reserve could issue was limited by the Federal Reserve Act, which required 40% gold backing of Federal Reserve Notes issued. By the late 1920s, the Federal Reserve had almost hit the limit of allowable credit that could be backed by the gold in its possession. This credit was in the form of Federal Reserve demand notes. A "promise of gold" is not as good as "gold in the hand", particularly when they only had enough gold to cover 40% of the Federal Reserve Notes outstanding. During the bank panics a portion of those demand notes were redeemed for Federal Reserve gold. Since the Federal Reserve had hit its limit on allowable credit, any reduction in gold in its vaults had to be accompanied by a greater reduction in credit. On April 5, 1933, President Roosevelt signed Executive Order 6102 making the private ownership of gold certificates, coins and bullion illegal, reducing the pressure on Federal Reserve gold.

Conservatism in the United States - Wikipedia, the free encyclopedia

More influential was the Chicago School of Economics, led by Milton Friedman (1912–2006) and George J. Stigler (1911–1991), which used advanced technical economics to advocate neoclassical and monetarist public policy. The Chicago School provided a vigorous criticism of regulation, on the grounds that it led to control of the regulations by the regulated industries themselves. Since 1974, government regulation of industry and banking has greatly decreased. The School attacked Keynesian economics, the dominant liberal theory of economics, which Friedman claimed was based on unsound models. The "stagflation" of the 1970s (combining high inflation and high unemployment) was impossible according to Keynesian models, but was predicted by Friedman, giving his approach credibility among the experts.

By the late 1960s, Ebenstein argues, Friedman was "the most prominent conservative public intellectual at least in the United States and probably in the world." Friedman advocated, in lectures, weekly columns, and books and on television, greater reliance on the marketplace. Americans should be "Free to Choose". He convinced many conservatives the draft was inefficient and unfair; Nixon ended it in 1973. Nine Chicago School economists won Nobel Prizes, and their ideas on deregulation became widely accepted. Friedman's "monetarism" did not fare as well, but economists such as Ben Bernanke took to heart Friedman's warning that the Federal Reserve had failed to stop the Great Depression when it had a chance. As Chairman of the Federal Reserve, Bernanke's energetic reaction to the great financial crisis of 2008 was based on Friedman's ideas.