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Monday, October 29, 2012

Malinvestment and Regime Uncertainty - John P. Cochran

An excellent article by Mr. John P Cochran titled, "Malinvestment and Regime Uncertainty" - John P. Cochran - Mises Daily.  The current "solutions" provided by the Federal Reserve and The Federal Government are having some adverse outcomes. He provides technical data to support his points.

Here is a key excerpt:

"The more aggregated model of the economy can lead one to misdiagnose the cause of the boom-bust and the slow recovery as aggregate demand shocks requiring continuing doses of monetary or fiscal stimulus. Examples are the Fed commitment to QE infinity, the call from market monetarists for monetary expansion to return nominal GDP growth to its long-term-trend path, or those who erroneously claim the slow recovery is a normal response to a recession accompanied by a financial crisis.[5] A wrong diagnosis of the problem leads to bad policy. Both current monetary policy and proposed renewal of Keynesian fiscal policies run the risk of generating further misdirections of production, which, to the extent they might positively impact employment now, run the risk of generating even higher unemployment in the future."

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