Revisionist Theory

I am so tired of talking about Money, especially knowing that the End-Result will only achieve Inflation. I agree thoroughly with Mark Perry on his assertion that Government bureaucrats will screw it up as badly as a Market already skewed by Government interventions. It expresses my disdain with the entire Subject that I am back to reading Austrian views on the Topic. Their paranoia about the State may seem somewhat overblown, but their distaste of central banks is very real and relevant. I do myself believe that Investors should lose the Cash, when they blow their funds on bad ventures; just as Capitalism is supposed to work. Central banks do serve some good purposes, though I am hard-pressed to define them. The bad effects of central banks seem to far outweigh the benefits, and have seemingly become a medium for making Debt ratios worse than they were before interventions.

The worse aspect of central banks must be considered its usage as vehicle for deficit Spending on the part of Government. They sell the instruments (in Our case Treasuries) which allows Governments to spend without Taxation, while allowing these instruments to proclaim a high Credit rating, no matter what the Markets determine by Purchase pricing. Treasuries might hold as high esteem as Credit Default Swaps, if the Fed did not intervene. Now, central banks are thinking to utilize the same process to underwrite bad Paper from the Private Sector. Rating agencies have been getting a bad Rep of late, and I think they should counterattack in a vicious way, and rate the central banks. It could help the entire Market structure, if the Assets and Liabilities of central banks were also on the table.

The Bailouts to this point have not underwritten the Risk factors of Lending, simply ensured that the bad Investment decisions of poor Management and Investors would be pulled from the Fire without Cost or Loss. This is not a desirable pattern, though many Economists would claim otherwise. Nothing that any central bank has attempted works to reduce the Debt ratio of unreclaimed liabilities to assets. The one thing Everyone should realize must be that We hold more liability to assets than ever before, and central bank policy is orientated to increasing these liabilities. Economic theory remains very unclear about this Issue, but expansion of Capital structure and technology should eventually lower debt levels. Central banks may be the reason why this does not occur. It might be Time to evaluate economic policies on the basis of theory. lgl