Andy Bradford <[EMAIL PROTECTED]> writes: > Thus said Von Fugal on Fri, 05 Dec 2008 11:39:59 MST: > >> I'm not at all surprised that's what is taught. But that's my >> conspiracy side coming in, so I'll be quiet now. ;) > > It's no conspiracy really that government (and hence government schools; > which oddly enough doesn't apply to BYU) favors a school of thought that > allows for an inflationary monetary policy. What I find ironic about the > whole situation is that the Federal Reserve is tasked with ``fighting > inflation,'' which is caused by none other than Federal Reserve > policies.
I read today an article by Ben Bernanke that explains why the Fed (and pretty much all central banks) aim for a small amount of inflation. First of all, the Fed's biggest tool is controlling the base interest rate. If the economy is in deflation, then there's nowhere to lower the interest rate without making the effective rate negative. So, a small amount of inflation allows the Fed to act in prevention of a deflationary trend before its primary tool becomes ineffective. http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021121/default.htm Milton Friedman, as I said in another email, proposed a fixed monetary rule that would peg the money supply at a fixed, known rate of inflation. He was certainly not in any government/banking conspiracy. You might want to consider looking at his reasoning instead of dismissing anything not approved by the Austrian school out of hand. --Levi /* PLUG: http://plug.org, #utah on irc.freenode.net Unsubscribe: http://plug.org/mailman/options/plug Don't fear the penguin. */
