By increasing the base money supply in the interbank market, guaranteeing financial institutions' liabilities or nationalizing the banking industry, governments suppress free-market forces, which could move the system back towards equilibrium. There should be little doubt that, after decades of government sponsored credit and money-supply expansion, such a correction would be economically painful, accompanied by further bank failures and output and employment losses.
However, it is hard to see how fighting the symptoms of the unfolding monetary fiasco could solve its underlying cause. Starting the printing presses wouldn't solve the debt crisis either. Hyperinflation would cause economic and political damage to the greatest possible extent.
Guess which presidential aspirant made this observation. If you said neither, go to the head of the class. Politicians don't deal in reality.
No comments:
Post a Comment