Sunday, March 29, 2009

Falling prices are not delfation but the antidote to deflation

George Gerald Reisdsman is Professor Emeritus of Economics at Pepperdine University.
His blog can be found here.

"...deflation is not falling prices but a decrease in the quantity of money and/or volume of spending in the economic system. To say the same thing in different words, deflation is a general fall in demand. Falling prices are a consequence of deflation, not the phenomenon itself.

Totally apart from deflation, falling prices are also a consequence of increases in the production and supply of goods, which are an essential feature of economic progress and a rising standard of living. In such circumstances, falling prices are not accompanied by any plunge in business sales revenues or profits, by any increase in the difficulty of repaying debt, or by any surge in bankruptcies. All of these phenomena are the result purely and simply of deflation, not falling prices.

"...there is no good way out of the present crisis other than by meeting it through the free-market’s means of a fall in wage rates and prices, mitigated to the maximum extent possible in ways consistent with the principle of economic freedom. What is required is a way out that once and for all ends the boom-bust cycle of inflation and credit expansion followed by deflation and contraction. The free market, a freer market than we have had up to now, is the only such solution.

Economic freedom and economic recovery both require that prices and wage rates be free to fall and that all legal obstacles in the way of their falling be immediately removed. In order for that to happen, as many people as possible must understand that falling prices are not deflation but the antidote to deflation.

Wednesday, March 25, 2009

Dear A.I.G., I Quit!

Part of me feels empathy for AIG employees, part of my wants to say, "You took government money and you expected no strings to be attached? How naive!"
Here is the letter:
Op-Ed Contributor - Dear A.I.G., I Quit! -

HT: Brian Bies

The Europe Syndrome and the Challenge to American Exceptionalism

If you take failure out of the equation, how can a person enjoy there true successes? We seem to be going down a different path now....but this IS the change people voted for, and have been voting for quite some time now. Do we want to be like secular Europe? Read on....................

The Europe Syndrome and the Challenge to American Exceptionalism — The American, A Magazine of Ideas

Tuesday, March 10, 2009

Subsidizing Bad Decisions

Thomas Sowell is always right on....

"The same politicians who have been talking about a need for "affordable housing" for years are now suddenly alarmed that home prices are falling. How can housing become more affordable unless prices fall?

The political meaning of "affordable housing" is housing that is made more affordable by politicians intervening to create government subsidies, rent control or other gimmicks for which politicians can take credit.

Affordable housing produced by market forces provides no benefit to politicians and has no attraction for them."