Most people know that enduring something that will eventually ‘resolve itself’ doesn’t make the enduring any less painful. That’s the general line of thinking for folks surviving deflation for not wanting it again. We’re still struggling thru the aftermath of the last one.
We agree that deflations are painful. I believe they’re necessary and a part of the regular economic cycle. My complaint is that the Fed isn’t the best method for handling the problem.
Keep in mind that one of the reasons we’re still in this bubble is that we never had a full accounting from the last bubbles. The Fed just kept the party going and enabled bad fiscal policy to be implemented.
If interest rates were allowed to rise as they would have naturally the market would already have been cleared. That’s my contention. Pre-Fed, deflations cured themselves and the economy thrived. Think Gilded Age.
If we were to return to those growth rates the debt would be repaid in a little over a decade, the need for welfare entitlements, including Social Security which is simply a tax, would come to a swift end. The disruptions in employment would be resolved on the state and local level, along with welfare. I don’t blame the Fed for everything, but it is a big part of the problem.
I believe in the free market and there are free market alternatives to the Fed. Can you think of some?