If you choose not to decide, you still have made a choice

“If you choose not to decide, you still have made a choice.” I read these words from the lyrics of Neil Peart as we await the perceived gospel of Ben Bernanke and question whether he will act again with policy. I want to argue today that no monetary stimulus, and no fiscal stimulus right now for that matter, is a form of economic stimulus. That’s right, doing nothing is stimulus. Keeping things the same is stability of policy which creates visibility of the rules of the road, visibility creates confidence, confidence leads to investment and hiring. Businesses plan long term, thus any short term government stimulus policy, whether fiscal or monetary, just mucks up business decisions and doesn’t change economic behavior for the better because companies and consumers know that government stimulus always has to end at some point soon with a price to pay for it during (inflation) and after (stimulus withdrawal, higher taxes). On the Fed’s goal of lifting asset prices, the distortion and manipulation of prices leads to the inefficient allocation of capital and malinvestment.

Print Friendly, PDF & Email

What's been said:

Discussions found on the web:

Posted Under

Uncategorized