You claim to be a fan of Milton Friedman. Yet you seem to be contradicting two of the ideas that made his reputation.
First, he, along with Anna Schwartz, authored *the* classic interpretation of the great depression, which concluded unambiguously that the depression could have been avoided, if only the Fed had printed a boatload of money and bailed out all the banks. This is what is happening now, yet you seem to be predicting doom, directly in contradiction to what Friedman and Schwartz concluded. The infamous "helicopter drop" is a direct quote from Friedman, and yes, this was a serious proposal.
Second, he pioneered the idea of rational expectations of inflation in bond pricing. People do not buy bonds assuming that there is zero inflation. That would be stupid. They buy bonds using their best information to predict likely future inflation, and adjust what they are willing to accept as a price appropriately. If people are buying bonds at near 0%, then that means they are not predicting massive inflation. They must be predicting low inflation or deflation, otherwise, these bonds would not be a good purchase.*
If you disagreed with this analysis, you could make a killing by shorting US government bonds - the "vigilante" scenario. But this is not happening. Pundits on the right are screaming from the rooftops that inflation is imminent, but they have not yet put their money where their mouths are, indicating considerably less economic confidence in their position.
Rational expectations also means that the only way to get seriously screwed by inflation is either by a rapid, unexpected inflation, or by holding lots of cash in a mattress or savings bank. Bonds are priced to include inflation, so they don't count.
-Jester
*or that the rest of the economy is such a wasteland that a near-0% rate of return is the best possible investment. But even then, if they were expecting 10% annual inflation, they could buy almost anything - gold, oil, land - rather than bonds.
First, he, along with Anna Schwartz, authored *the* classic interpretation of the great depression, which concluded unambiguously that the depression could have been avoided, if only the Fed had printed a boatload of money and bailed out all the banks. This is what is happening now, yet you seem to be predicting doom, directly in contradiction to what Friedman and Schwartz concluded. The infamous "helicopter drop" is a direct quote from Friedman, and yes, this was a serious proposal.
Second, he pioneered the idea of rational expectations of inflation in bond pricing. People do not buy bonds assuming that there is zero inflation. That would be stupid. They buy bonds using their best information to predict likely future inflation, and adjust what they are willing to accept as a price appropriately. If people are buying bonds at near 0%, then that means they are not predicting massive inflation. They must be predicting low inflation or deflation, otherwise, these bonds would not be a good purchase.*
If you disagreed with this analysis, you could make a killing by shorting US government bonds - the "vigilante" scenario. But this is not happening. Pundits on the right are screaming from the rooftops that inflation is imminent, but they have not yet put their money where their mouths are, indicating considerably less economic confidence in their position.
Rational expectations also means that the only way to get seriously screwed by inflation is either by a rapid, unexpected inflation, or by holding lots of cash in a mattress or savings bank. Bonds are priced to include inflation, so they don't count.
-Jester
*or that the rest of the economy is such a wasteland that a near-0% rate of return is the best possible investment. But even then, if they were expecting 10% annual inflation, they could buy almost anything - gold, oil, land - rather than bonds.