When an economic bubble bursts, normalcy can only return if the price excesses created during the bubble are wrung out of the market. A recession is often a painful but necessary market mechanism that corrects the pricing distortion and consequent misallocation of capital that occurs in a bubble. When government intervention prevents the mispriced asset class from fully deflating, capital continues to be misallocated and economic malaise lingers on. This is the takeaway message from Peter Schiff’s Wall Street Journal editorial.
Archive for the 'Federal Reserve' Category
Observing the carving of our currency, as it is sliced by administration fiscal policy and diced by Fed monetary policy.
On February 1st, I noted in this post that, based on the data in handÂ and reliable projections, the recession seemed to be on track to become the worst downturn since the back-to-back recessions of 1980-82, but that it was a huge exaggeration — and unecessarily alarmist — to say that it’s the worst since the […]