 Yes, but... (You say) ..slows down the diversion of real wealth from real wealth producers to non-wealth producers. (New §) This means means that various bubble activities or non-productive activities are now getting less support from the money supply, and they fall into trouble.
IF ONLY. But you assume (?) or seem to suggest (?) that bubble activities go round with a big placard, saying "I am a Bubble" on their bodies, front and back, and that hence that null class of which economists love to fantasize, "Prudent Bankers", suddenly remember their lessons from Banking 101, and start rationing their heretofore reckless lending practices. But this does not happen. Owners of bubbles never admit their own folly. Stupid wannabe captains of industry, or visionary politicians, out spending the hoped for and expected tax revenues of the next ten,fifteen or twenty years on Liberal Arts colleges, baseball stadia, leisure centres, art galleries, and other monuments to their own poor taste and poor judgement, ("But what the hell, my nephew is an architect, and they need the work",) will never admit that their follies are b u b b l e s. The banks do not (cannot?) discriminate between sound and unsound efforts, and are usually in a state of denial about their own ill advised loans. They keep on lending far too long, and then HAVE TO cut off funds from all enterprises, good, less good and criminally incompetent, because they have not got any money to give. Leaving only the Fed, the most corrupt adjudicator between conflicting claims imaginable, because they have so much repsonsibility for creating the mess in the first place. And effective cure requires painful treatment after an honest and accurate diagnosis: which disqualifies the Fed. We have the word "Iatrogenic" for diseases caused by medical men: what is the equivalent for economic self inflicted pain - Nobeleconomicogenic ? - it hardly runs trippingly off the tongue.
In the long run, the bubbles pop. But in the long run, even Keynes is right. Commented 3726 days ago |
