The chapter of the video I have linked to above is only 6 1/2 minutes long. It tells the stagflation story, from 1971, that sounds just like the news today! Okay, we don't have wage and price controls yet, but they are likely given the massive amount of money that has been pumped into the economy. (BTW, the multimedia presentation that plays next to the video is excellent.)
I saw in Henry Paulson's exit interview with Maria Bartiromo that he said, "Everybody agreed with what we were doing."
I don't think he talked to enough people.
He talks about "a build up." That "build up" was the slow steady printing of money at a rate of 2% to 3% a year over twenty years. That was the root cause of all of the other wackiness.
It's the same story as the French Inflation disaster. All the "smart people" said printing money was the fix! (Same as global warming, for that matter - "everyone agrees!" - I don't think so.)
This is like the Shuttle taking off when the weather was too cold. There were people who knew that was a bad idea but the people in charge didn't have the mindset to hear the message.
I guess the hard thing for people to get is that the root problem is printing too much money. Whether that shows up as stagflation, or a housing bubble, or a tech bubble, or the current US Government bonds bubble - it's all the same root cause.
And think about it - if printing money is such a great thing - then just print it and distribute it democratically! But no ... for some reason, the folks in power give it to their friends. That should tell you there is a problem right there.
If you print a counterfeit $100 bill then you get $100 in value when you first spend it. But as your fake bill circulates it becomes less and less special. (Finally someone gets stuck with the fake - but let's not even consider that for now.) Whoever gets the money first gets the most value. As time goes on, the general money supplies is inflated, and the value of all remaining money goes down.
If this were not true, it would be perfectly legal for you to print counterfeit money. You would be creating an "economic multiplier" in the words of Paul Krugman (read about his goofy "multipliers", although this idea of his is good). You would be helping the economy. If printing money is good - why is it only good if the government prints it? Why shouldn't you?
Huh? Why not?
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