A little validation...
Some choice quotes from a recent Reuters article:
Central bank forecasts this year have consistently been getting it wrong, underestimating how fast inflation would rise or how quickly economic growth would slow.
Pretty much the cause of the bank crisis that I nailed down in my last big post about it. The only thing unique about my theory is that I credit the banks' own fractional-reserve lending as the primary cause of inflation. They try to set inflation (and thus their profits) near the maximum sustainable rate, but if they get too greedy or fail to anticipate a slow in growth, we end up in situations like we're in now.
For example, the model could fail to highlight a step change in output growth that could occur if oil prices moved past a particular level.
One "step change" that's easy to understand is the effect gas prices have on our economy. As fuel prices rise, it places a growing burden on industry and commerce, all of which is eventually borne by consumers. But at some point, people just stop buying gas. Then the economy dramatically transforms in ways bankers' simple linear models can't account for.
However, its cause can be taken back to exceptionally low interest rates after the September 11 2001 attacks on the United States, which prompted investors to look almost anywhere for greater profits.
Banks started making home loans to Americans who could not previously get credit, and packaged up this "sub-prime" debt into complex financial instruments which few people understood.
Perfect examples of what I called "desperation lending" and manipulating the monetary system to exploit people's misunderstanding of what money is and how the banking system operates.
Central bank forecasts this year have consistently been getting it wrong, underestimating how fast inflation would rise or how quickly economic growth would slow.
Pretty much the cause of the bank crisis that I nailed down in my last big post about it. The only thing unique about my theory is that I credit the banks' own fractional-reserve lending as the primary cause of inflation. They try to set inflation (and thus their profits) near the maximum sustainable rate, but if they get too greedy or fail to anticipate a slow in growth, we end up in situations like we're in now.
For example, the model could fail to highlight a step change in output growth that could occur if oil prices moved past a particular level.
One "step change" that's easy to understand is the effect gas prices have on our economy. As fuel prices rise, it places a growing burden on industry and commerce, all of which is eventually borne by consumers. But at some point, people just stop buying gas. Then the economy dramatically transforms in ways bankers' simple linear models can't account for.
However, its cause can be taken back to exceptionally low interest rates after the September 11 2001 attacks on the United States, which prompted investors to look almost anywhere for greater profits.
Banks started making home loans to Americans who could not previously get credit, and packaged up this "sub-prime" debt into complex financial instruments which few people understood.
Perfect examples of what I called "desperation lending" and manipulating the monetary system to exploit people's misunderstanding of what money is and how the banking system operates.