Whip Deflation Now

Mario Draghi this morning announced his long-awaited QE program, supposedly to restore economic growth and banish the evil genie of deflation from the land. The reaction, of course, is to buy stocks because where else can the money go? Insanity. Draghi and his counterparts elsewhere seem to believe that they can drive their economies around like trucks. If so, why have they never been successful before? Japan, where QE was invented, is on the verge of complete economic collapse after twenty years of treatment, more or less. Is this a harbinger of success?

Of course not. Instead, we have colossal piles of debt which are completely unserviceable except at zero or near-zero interest rates and asset values somewhere between ludicrous and insane. And yet the pumping goes on.

Commodity prices and other indicators tell the story. It is a story of failure. Bubbles breed malinvestment and the subsequent destruction of credit money. When we look back a few years from now, I hope that, finally, economists learn something.

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