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(The Year 2012 In Review)
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|User Info||"It" Happened; entered at 2009-04-14 09:42:14|
Registered: 2008-11-20 Land of the fees Home of the slaves.
As the old saying goes, Ben is pushing on a string. Until they fess up and admit that continually lowering interest rates through central policy and QE induces destruction of capital, they will continue to induce deflation. The only enterprise prospering in this deflationary environment is bond speculation (Antal Fekete). |
The marginal productivity of debt is the indicator which the Fed and Treasury must admit is dominating overall market behavior. The higher the ratio, the more successful entrepreneurs are in increasing productivity. Continually lowering interest rates by central policy are incrementally decreasing the marginal productivity of debt and thus eroding available capital, a deflationary effect that will not stop unless interest rates rise. Its interesting to note that once the marginal productivity of debt went negative the cost of CDS exploded and in fact, could have been the primary impetus for the deregulation of Glass Steagall in the first place. Which of course led to the insane over leveraging by our "honored" financial institutions.
Its time for Ben et al to abandon the Quantity Theory of Money and return to real economic theory.