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Brian Kantors advocacy for SARB printing highlights MAJOR error in modern economics.
Error in logic stems from narrowly thinking that the only cost to low rates, debt and money printing (monetary inflation) is CPI inflation. This is unequivocally WRONG https://www.investec.com/en_za/focus/economy/covid-19-and-the-economy-estimating-the-damage.html
Error in logic stems from narrowly thinking that the only cost to low rates, debt and money printing (monetary inflation) is CPI inflation. This is unequivocally WRONG https://www.investec.com/en_za/focus/economy/covid-19-and-the-economy-estimating-the-damage.html
Monetary inflation makes money out of nothing, which leads the economy to believe savings have increased, when they haven't. These artificial savings cause investors to invest in all sorts of businesses that wouldn't have been profitable if it wasn't for the monetary distortion
E.G. an investment in speculative US shale gas isn't profitable without low rates and inflated oil prices.
This "investment process" based on monetary inflation feels good but in reality its an investment based on an artificial foundation, a malinvestment.
This "investment process" based on monetary inflation feels good but in reality its an investment based on an artificial foundation, a malinvestment.
When that artificial foundation (monetary inflation) is removed, deep pain is experienced as the malinvestment is uncovered for what it is.
Interest rates are the price of money, the most NB variable in economy, effecting every transaction. Not just big investment decisions
Interest rates are the price of money, the most NB variable in economy, effecting every transaction. Not just big investment decisions
Did you need that luxury car/pent house/designer suit, or did it seem affordable because of low rates? These are bad capital allocation designs, if they're effected by monetary stimulus.
Monetary stimulus impacts time preference, making us prefer today relative to the future.
Monetary stimulus impacts time preference, making us prefer today relative to the future.
If interest rates are high I'm forced to wait & save for my goals, leading to more meaningful productive long term investments. Low rates allow me to be impulsive & buy that awful floral shirt now
I don't care where people spend as individuals, that is their right, but...
I don't care where people spend as individuals, that is their right, but...
We don't want our whole society buying useless floral shirts, I. E. impulsively and meaninglessly spending because there is seemingly no cost. Short-termism is the more dangerous pandemic than coronavirus, as I wrote here: https://pricelesseconomics.wordpress.com/2020/03/31/short-termism-is-the-more-dangerous-pandemic/
Kantor (and many others) thinking that CPI is the only cost to monetary inflation may be the most dangerous idea in the world. Its enslaving society into short-termism, capital miss allocation, weak growth, joblessness, centralisation of power in govts and meaninglessness
