Keynes and his Fan Club
With apologies to his fans, Jerry is an evil little mouse who constantly pesters Tom the Cat. Tom tries and tries, but cannot seem to overpower someone who is a fraction of his size and strength.
Watching Stephen Moore attempt to debate Paul Krugman was like that. The “economics” of Krugman is Keynesian economics. It consists of central planning your life by force, because market failure. And Krugman repeated this phrase “market failure” several times. Of course the solution was always government intervention.
John Maynard Keynes and his book
Photo credit: Corbis
Is Everything Just Fine?
Hyperinflation is commonly defined as rapidly rising prices which get out of control. For example, the Wikipedia entry begins, “In economics, hyperinflation occurs when a country experiences very high and usually accelerating rates of inflation, rapidly eroding the real value of the local currency …”
Playing with money – what a joy!
Photo via educationforum.co.uk
A Flawed View
I have to admit that I derive some pleasure in taking on hoary old myths. For example, some economists assert that the interest rate you see on the Treasury bond is not real. You see, it’s only nominal. To calculate the real rate, they say you must adjust the nominal rate by inflation.
Real Interest Rate = Nominal Interest – Inflation
It seems to make sense. Suppose you have enough cash to feed your family for 2,000 days. Then the general price level increases by 15%. You still have the same dollars, but now you can only buy groceries for 1,700 days. You’ve been robbed, some of your purchasing power stolen. Therefore you want to earn enough interest to overcome this loss. This view is flawed.
Image via stealthflation.org
More Articles of Interest:
- Gold Panic
- Venezuela's Hyperinflation Crack-Up Boom on its Way to Outer Space
- The Kicking of the Can
- Misunderstanding Gold Demand
- Italy – Non-Performing Loans Hit a New Record High
- Should You Buy a House?
- A Desperate Message from Beijing …
- The China Syndrome
- The US Stock Market and a Major Recession Warning