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Wednesday, May 28, 2014

A Short Economics Lesson



I came across this a few days ago and when I find something that is well written and makes a light go on, I like to share:


When good decisions are no longer possible, bad decisions are inevitable.

The real cost of credit and capital is discovered by open, transparent markets. When a central bank sets the price of credit, it destroys the market's price-discovery process. When the government subsidizes certain types of credit, for example, home mortgages and "cash for clunkers" auto loans, it destroys the market's price-discovery process.

This distorts not just the price of credit, but the price of everything purchased with credit. This is the origin of bubbles, and of the resulting busts.

(Read  the whole article here.)

There, if you read and understood this, you now know more than Bernanke, Yellen, Greenspan, Krugman, etc.

The  Federal Reserve manipulates credit markets and interferes with the price-discovery process.  This eventually leads to financial disasters and bailouts by the FED to save its buddies, who are too big to fail.

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