| DON YOCHAM
For the Love of Science
Call me a “Western Oppressor,” but I’m a fan of science.
Always have been.
I got my first subscription to what is now Discover magazine in 1978.
I was 7 years old and I specifically remember an edition the following year that described a disease that made the jump from primates to humans that severely compromised the human immune system.
It was HIV. And when AIDS started hitting the news a few years later, I explained it to my parents.
I couldn’t tell you the starting quarterback for the Dallas Cowboys. But I could rattle off nature documentary hosts like Carl Sagan with Cosmos, the prolific David Attenborough, and the admittedly bland and dorky Marty Stouffer that hosted Wild America.
I understood the difference between RNA and DNA in elementary school, tested at a high school level in science by the 4th grade, and defended evolution in front of my church at age 11 (pretty much every week, my parents were told I was going to Hell).
I cherished the understanding science brought.
With a child’s imagination, I could be deep in the jungles of Borneo, marveling at Orangutans one minute and floating in the CO2 rich atmosphere of Venus the next.
But more than the knowledge science wrought, I loved the process of knowing.
The scientific method gave us a way to understand objective reality. Nothing has done more to pull humanity out of ignorance and suffering than systematically observing and questioning our environment to create testable hypotheses.
But science doesn’t explain everything.
It can’t begin to describe consciousness. The only way science can explain free will is to call it an illusion.
And, unfortunately for all of us living in a world run by central banks, science fails completely at determining the right price of money.
A fact that the eggheads at the Federal Reserve of San Francisco recently stumbled across.
The Long Way to the Point
In roughly 35 pages of nearly inscrutable mathematical gobbledygook, plus 15 pages of references, a handful of PhD dorks concluded that maintaining loose monetary policy for the long term leads to financial instability.
Here’s the formal paper, for those of you that enjoy banging your head against a wall.
Keep the price of money cheap for more than 5 years and, low and behold, credit markets overheat with too much easy cash.
Financial crises ultimately follow.
You don’t say.
Their hint was a previous study that suggested “financial crises are the consequence of a central bank that keeps the policy rate too low for too long which in turn fosters an investment boom and eventually a capital overhang.”
Austrian economists like Mises and Hayek have been screaming this from the rooftops for nearly 100 years.
They have the models. They have formulas. All of which is fueled by basic common sense.
However, as I’ve learned, economic PhD programs specifically avoid radical free market theories because following its logic eliminates the chance of receiving grants from the U.S. government or the Federal Reserve.
And as a sign that professional economists never forget where those grants come from, the authors notably eliminated wars from their analysis.
Now, I would argue that crises resulting from prolonged monetary stimulus leads to war as a last result. But I guess accounting for war got too close for comfort given how we’re now, after 13 years of cheap money, openly courting war with Russia, China, and Iran.
In any case, going with their results, if 5 years is long enough to trigger financial crises, imagine what 13 years of super cheap money will deliver?
 |
| | | | |
|
|
0 Response to "The Fed Finally Figured Something Out"
Post a Comment