Thursday, April 27, 2006

Has Easy Al been blowing bubbles?

Eric Englund has an interesting guest editorial on financial sense university-

"This mortgage-debt bubble, as engendered by the Federal Reserve, is leading millions of Americans to financial ruin. This may become the most calamitous clustering of financial error in U.S. history. If anything positive comes out of this economic mess, perhaps it will be the demise of the Federal Reserve itself. Regrettably, the Fed’s failure will have come at an enormous price, including the possibility of volatile social unrest."

"A terrifying thought it is."

and a key point from a referenced book ( Austrian Theory of the Trade Cycle ) to consider -

"The Austrian theory of the business cycle emerges straightforwardly from a simple comparison of savings-induced growth, which is sustainable, with a credit-induced boom, which is not. An increase in saving by individuals and a credit expansion orchestrated by the central bank set into motion market processes whose initial allocational effects on the economy's capital structure are similar. But the ultimate consequences of the two processes stand in stark contrast: Saving gets us genuine growth; credit expansion gets us boom and bust."

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