Letting bubbles inflate and then fighting them when they burst actually worked for a while. That’s what makes it dangerous. It worked in the ’90s. But you shouldn’t read too much into this: This period was assisted by unusually favorable conditions. From 1981 until early last decade, commodities were in a bear market after a bubble in the ’70s and early ’80s. And interest rates were falling throughout the ’80s and ’90s, too. They almost never stopped falling. That made Fed policy look like it was working.

Bubbles can still happen without expansionary monetary policy. In the 19th century, you had bubbles in railroads, for example. But today, the Fed has created a bubble in everything — in every single asset class. This is an achievement even for a central bank. Stocks. Commodities. Bonds. Real estate. Gold. Everything goes up when the Fed prints. The only asset that goes down is the U.S. dollar.

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Uploaded by MaxJordano. – News videos hot off the press.

In (NBER Working Paper No. 15929) Reading the Recent Monetary History of the U.S., 1959-2007, co-authors Jesús Fernández-Villaverde, Pablo Guerrón-Quintana, and Juan Rubio-Ramírez develop a model the U.S. economy and use it to analyze the history of the great American inflation, from the late 1960s to the early 1980s, and of the great moderation of business cycle fluctuations between 1984 and 2007. They divide the nearly fifty-year period into five sub-periods corresponding to different chairs of the Federal Reserve Board of Governors (Martin, Burns-Miller, Volcker, Greenspan, and Bernanke). The researchers find both changes in the volatility of the structural shocks that hit the economy and changes in monetary policy over these decades.

Their analysis suggests that a decline in the volatility of economic shocks accounted for most of the great moderation, while changes in monetary policy accounted for the increase and then the taming of the great American inflation. Results from their model indicate that Inflation remained low during the great moderation in large part because of favorable economic shocks.

The authors estimate that if monetary policy had behaved under Burns and Miller in the 1970s as it did later under Volcker, then inflation would have averaged 4.4 percent per year, rather than 6.2 percent for that decade. In another counterfactual simulation, the authors ask what would have happened if the average monetary policy stance of the Greenspan years had been adopted at the time of Burns’s appointment. They conclude that it would not have made much of a difference: inflation would have been slightly higher, 6.8 percent instead of 6.2 percent, in the 1970s. The authors conclude that monetary policy during the Greenspan years was not too different from monetary policy in the Burns-Miller era, but that it was accompanied by more positive economic shocks.

In the Volcker years the response of monetary policy to inflation was consistently strong, but Volcker was an unlucky chairman: the economy suffered from large and negative shocks during his tenure. In a counterfactual simulation in which the direction of the economic shocks during the Volcker period remains fixed, but the magnitude of the shocks is scaled back to match the average volatility over the whole five-decade sample, the price level would begin to fall by the end of 1983, rather than rising at roughly 3 percent per year as it did.

In contrast, economic shocks supported the monetary policy choices of the1990s. Positive and stable investment-specific technological shocks, lower demand pressures, and labor supply shocks that pressured wages and marginal costs downward explain most of the great moderation. Without changes in the volatility of these shocks, the reduction in the variability of inflation would have been only one-fifth of what was observed.

– Claire Brunel

Source: NBER

Some foresaw the trouble, but most were wiped out financially. This paved the way for radical politics and a thirst for vindication that eventually led to World War 2 and the destruction of 100 million lives.

It appears that this link has the book When Money Dies in its entirety. Full text. Free. Everything.

LINK

US Senate Candidate, Founder of Euro Pacific Capital & Successful Author (NEW BOOK “How an Economy Grows and Why It Crashes”). Schiff tears apart the ‘recovery’ and points to a precipitous decline in the US dollar. Don’t listen at your own risk.
AUDIO

Bill Fleckenstein

President of Fleckenstein Capital, a money management firm based in Seattle. The outspoken critic of Alan Greenspan rails on the mess that the money printers have left us.
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John Williams

Founder of Shadow Government Statistics Newsletter and Specialized Economic Consulting Services: Analysis Behind and Beyond Government Economic Reporting. A resolute independent, Williams cracks open our suspicions that the mainstream media is rigged.
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Matt Simmons

Founder and Chairman of the Board of the Ocean Energy Institute & Former Chairman Emeritus of Simmons & Company International. Simmons presents some scary thoughts on the BP disaster…putting his own reputation on the line. Let’s pray that Simmons isn’t right.
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Absolute Must Listen: Ben Davies

CEO of Hinde Capital – Ben ran trading for RBS Greenwich Capital in London where he managed a macro portfolio. Davies presents the stunningly convincing case for gold.
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Jeffery Saut

Managing Director & Chief Investment Strategist for Raymond James – Jeffrey known for his insightful market commentary is a regular on Wall Street Week, CNBC, Bloomberg TV and more. A fantastic interview for a surprisingly opinionated CIS of a mainstream broker – Saut has been a leading thinker in the investments industry for a long, long time.
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James Turk

Chairman and Founder of Goldmoney.com – James has written “The Freemarket Gold & Money Report,” an investment newsletter since 1987. Turk makes the ultimate case for the barbaric relic, highlighting its true value vs. its price.
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Source: KingWorldNews

“Nouriel Roubini Gary Shilling David Rosenberg these are the true deflationists says doctor Marc Faber they advice to be in US government bonds and to basically avoid everything else …adds Marc Faber : I do not think that the US Bonds are desirable investment for the next 5-10 years….Investments in US Bonds and cash may be a very risky strategy in the long run , Dr Faber rather sees inflation coming than deflation : I am not a great believer in deflation , all the prices around the world are going up …”

Central banks are relying on old tricks to stop deflation. Unfortunately, monetary policy is ineffective as we are stuck in a liquidity trap.

What Ended the Depression?

If you’re concerned with public debt levels around the world, this is a great read. Here’s Chancellor’s introduction to the paper:

This paper seeks to answer several questions: Why in the past have governments defaulted on their debts? When have deeply indebted countries kept faith with their creditors? Under what conditions do governments opt for inflation rather than default? And, in the light of our historical findings, is Greece really the crest of a wave of sovereign debt crises about to crash down upon the developed world?

As you may have gathered, the debt crisis in countries that control their monetary policy and issue debt in domestic currency is really an inflation issue. The US will never technically default – they will print money and devalue the currency first.

But does he think the US is at that point? Read on…

Read the full report