|
Accounting
Sleight of Hand |
The
injection of new money will likely cause consumer prices to
rise over the long term and create hardship for ordinary
citizens. Of course, government statisticians in several
countries now exclude the cost of food and fuel from their
consumer price indices. Government officials can therefore
deny the existence of consumer price inflation and remain
oblivious to the harmful effects of their well-intended
stimulus packages. However, there are two ways to measure
inflation. The first method, favoured by the Austrian School
of economics, measures the percentage by which the central
bank increases the amount of money in circulation. The
second method calculates the rise in consumer prices over
time once new money has been printed and put into
circulation.
Governments
have disguised inflation and unemployment in order to make
an ailing economy appear much healthier than it is. Over the
past decade, Canadian officials have revised the method used
to calculate unemployment. After the new method was
introduced, the unemployment rate in one region of Eastern
Ontario dropped from 16% to 7% without a single new job
having been created. Regions can now lose hundreds, even
thousands, of jobs with little change in the official
unemployment rate.
Delaying
Needed Correction |
Economies worldwide need to correct and liquidate a massive
amount of malinvestment. Such correction can only occur if
governments are willing to allow it to occur. Unfortunately,
that badly needed economic correction will be delayed as
governments persist in manipulating, stimulating, and
generally exerting control over economic activity. In the
long run, such state action could lead straight to the very
economic depression it is ostensibly meant to avoid.
US Federal Reserve
Chairman Ben Bernanke is well versed on economist Milton
Friedman's analysis of the causes of the Great Depression
and his proposed remedies to avoid such situations. However,
he seems unaware of the fact, revealed by economist Murray
Rothbard in his treatise on America's Great Depression,
that Friedman may have misinterpreted economic data from the
early 1930s. The result of that misinterpretation could play
out over the next several years in the form of economic
stimulus packages that cause more harm over the long term
than good over the short term.
|