Prices are information. They relay to entrepreneurs where to best allocate resources in order to satisfy consumer demand. Because it is a society’s medium of exchange, money has a universal price; generally, everything is priced in terms of money. Distort the price of money and you throw the entire system into disarray causing what Austrian economists call malinvestment. Resources flow into areas that they should not and away from areas where they should, not because entrepreneurs have lost the ability to make sound decisions, but because the information upon which they rely to make those decisions is corrupted.The Fed is playing a dangerous game by bailing out failing institutions like banks and automobile manufacturers.
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