Many people are unaware of it, but there has always been a Fifth Horseman of the Apocalypse. Overlooked in scripture, he has been there nonetheless, waiting with rancid, baited breath to gallop across the world and leave his destructive hoof-prints in the rubble of Western civilization. He is, according to many government spokesmen and media pundits, the Horseman called "Deflation."
Next to dire warnings of SARS, Mad Cow Disease, and the hegemony of conservative talk radio, the big "scare story" of 2003 was that deflation was upon us, or approaching. Beginning as a trickle in the first quarter of '03, the reports turned into a flood after April. Suddenly, dozens of "experts" and policy analysts lamented with great wailing the forbidding approach of the destructive force known as deflation. Politicians spending other people's money advised us that the Federal Reserve had better do something fast, because the dollar was, as many phrased it, "too strong."
Today, with the passage of a year to allow for dispassionate analysis, the anguish appears to have been misplaced. Not only has the US economy not fallen into a deflationary period, it has continued to see a consistent, though low, decrease in the buying power of the Dollar—a continuation of the inflationary behavior of the Fed that has been its salient characteristic for most of its existence.
In May of 2003, members of the Bush Administration began "talking down" the dollar, hinting that they wanted to see it lowered in value relative to the Euro. American Enterprise Institute economist John Makin was quoted in a May 26 Scripps Howard News Service article as believing that a 10 to 20 percent decline in the dollar would increase "economic growth" to 3% by 2004.
Full article: http://mises.org/daily/1506
No comments:
Post a Comment