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Quote by: bishop  all adjustments to money supply can be construed as artificial.. be it hording commodities, or adjusting lending rates.. |
I meant "artificial" in the sense of not being a result of emergent market phenomena -- not in the sense of being merely human-produced.
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i'm not sure, however, that the rate cuts must inevitably produce a bust - although they were kept in place way too long for my liking and certainly were (at least partially) responsible for creating the housing bubble as well as global inflation (notwithstanding the effect of oil prices).
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Read
here and
here for more information on what I'm talking about.
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that said, rates are still low compared to historical norms. the true problem seems to lay in our fiscal deficit - visualized by the continuing slide of the dollar versus competing currencies.
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Expansion of credit through artificially manipulating interest rates (i.e. doing so via extra-market, or political, forces) is effectively the same as simply printing more money, albeit more subtle. The continuing slide of the dollar vs. "competing" currencies (which itself implies the fallacy of mercantilism) is a direct result of an increase in the supply of money, also known as inflation.
- Rob