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2001 was prior to the crisis. What the Austrian economists were saying after the crisis (which was 2008/2009) that the actions to address the crisis through fiscal and monetary stimulus would cause high inflation, high interest rates and devalue the dollar. The gold-bugs who believed this view, ran out and bought gold.
What constitutes discrediting a theory if not its predictions being wrong? It’s really important to distinguish between fundamental predictions of a model and predictions that an economist happens to make that don’t really come from the model. The prediction that huge increases in the monetary base will cause large increases in the price level, and that big government deficits will cause big increases in interest rates, are more or less inescapable if your model of the economy is one in which recessions are supply-side problems, not the result of inadequate demand. Conversely, the prediction that neither of these things will happen if the economy is in a liquidity trap is a fundamental prediction of Keynesian models. In this crisis, the Keynesians got it right and the Austrians got it wrong.
There is no wiggle-room here -- and resorting to name-calling and calling the side that got it right "morons" doesn't give your view more merit.
How are they being wrong? Gold was around 2 to 300 in 2001, even after this "crashed", it is still 6 times what it was about 10 years ago.
Tell me you can buy more with your dollars. Or tell me an investment you have that give you more than 500% in 10 years. Beside Apple and Google, I cannot even name others.
Gold is just like all other commodities, it is pegged to the dollar. When dollar tank, commodities price go up, vice versa. What make gold interesting it is no one's liability and it has no other use.
It's a simply fact that the Austrian model - which has "printing money always leads to high inflation" as one of it's CORE PRINCIPLES - didn't work this time around. It wasn't even close. That truth may hurt, but that doesn't change the fact that it's THE TRUTH.
Ken
Printed money always lead to high inflation, that's true. Tell me if you can buy more today than you did last year or 5 years ago. I am not talking about technology, I am talking about necessities. Technology always bring down the price.
When central bank print, the money has to go somewhere. Since money is 1/2 of all transactions, then the more money in circulation, the higher price is for the resource. We live in a world with limited resources and if money is 1/2 of all transaction, then when money supply increase, price for the resources increase. This is simple supplies and demands
In this case we are experiencing low inflation as a result of hyper-liguidity which is a parasite on the middle and lower classes; causing lower demand. Even though the cost of goods, commodities, staples is actually inflating, nobody is buying.
"The big difference this time is falling family incomes. Going back well before the onset of the 2007-09 recession, household incomes were stagnant even before adjusting for inflation. Take higher prices out of the equation, and you wind up with a multi-year decline in many families’ buying power."
"As for monetary policy, it is so easy it is actually counterproductive. Rates are so low that many savers have seen their interest income wiped out completely. Little wonder that inflation is gone with the wind."
If the economy does manage to pull out of this malaise, if people start purchasing again; we will start seeing inflation, or worse, hyperinflation. When this happens (and it will) metals will skyrocket.
I think you have your cause and effect backwards. You said "we are experiencing low inflation as a result of hyper-liguidity (sic) which is a parasite on the middle and lower classes; causing lower demand." No, the economic downturn caused the lack of demand, which resulted in unemployment, which further reduced demand. During that period GDP dropped 6-8%. The fiscal and monetary stimulus, which added liquidity, was a tool to address the economic downturn, not the cause.
When full employment returns, the Fed can address any inflation then by tightening money, as it has done before. But to address phantom inflation now, when millions are out of work -- as some anti-Keynesians have suggested, makes no sense.
Printed money always lead to high inflation, that's true. Tell me if you can buy more today than you did last year or 5 years ago. I am not talking about technology, I am talking about necessities. Technology always bring down the price.
When central bank print, the money has to go somewhere. Since money is 1/2 of all transactions, then the more money in circulation, the higher price is for the resource. We live in a world with limited resources and if money is 1/2 of all transaction, then when money supply increase, price for the resources increase. This is simple supplies and demands
It hasn't led to high inflation THIS TIME - so CLEARLY it doesn't "always lead to high inflation". Likewise, currency backed with gold is no guarentee of low inflation - some of the worst inflation the US has ever seen was back when we had gold-backed currency.
Gold must have just become some kind of burden to them.
Maybe they went to direct security and bought guns.
Guns and ammo always rise in value; and they're more useful than art.
Really?
NO ONE sits on dollars?
I got news for you - you are BADLY misinformed.
"Corporations are stowing away cash at record rates, reluctant to invest in their businesses or hire new workers as uncertainty clouds the future.
Amid a lackluster earning season that has featured many companies missing sales expectations, cash balances have swelled 14 percent and are on track toward $1.5 trillion for the Standard & Poor's 500, according to JPMorgan. Both levels would be historic highs..."
How are they being wrong? Gold was around 2 to 300 in 2001, even after this "crashed", it is still 6 times what it was about 10 years ago.
Tell me you can buy more with your dollars. Or tell me an investment you have that give you more than 500% in 10 years. Beside Apple and Google, I cannot even name others.
Gold is just like all other commodities, it is pegged to the dollar. When dollar tank, commodities price go up, vice versa. What make gold interesting it is no one's liability and it has no other use.
I do not own gold. It is just my 2 cents.
I wasn't referring to gold prices over the 10-year period. I was referring to the period in recent times. Glenn Beck wasn't hawking gold in 2001 -- but he was in recent times. In recent times, those that followed the Austrian economists and believed that the dollar was going to tumble, we were getting hyperinflation and interest rates were going to skyrocket, were 100% wrong.
Gold gained ground from 2001 to 2008 because that's when the dollar did its huge tumble.
"Corporations are stowing away cash at record rates, reluctant to invest in their businesses or hire new workers as uncertainty clouds the future.
Amid a lackluster earning season that has featured many companies missing sales expectations, cash balances have swelled 14 percent and are on track toward $1.5 trillion for the Standard & Poor's 500, according to JPMorgan. Both levels would be historic highs..."
NOT for the last 2 years - and especially not yesterday. Anyone who owned gold yesterday saw an inflation rate against their gold of 10% IN ONE DAY!
Ken
Inflation or manipulation?
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