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-- either as free people or as slaves.

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Tuesday, January 31, 2012

Housing prices drop, Federal Reserve to treat deflation

Housing prices drop, the Federal Reserve Board promises to treat deflation

The specter of deflation continues to haunt the Obama Administration. Why do capital prices continue to stagnate or decline when commodity prices have been rising?

The Federal Reserve has promised to treat the problem with more currency expansion. Fed interest rates hover at 0%. Interest cannot go lower than that.

Typical economic analysis indicates capital prices should rise with currency creation, which is why the Fed is doing it. The reasoning is if people expect the currency to devalue, they grab something which won't, like physical property.

But the problem isn't a low interest rate, but a lack of much interest at all. As long as the Obama Administration remains intensely hostile to American business (not to mention Americans' freedom) nobody will be much interested in doing much business in America.

The stagnation and decline in asset prices is a result of people expecting fixed assets to become worth less because of government meddling.

The answer is pretty clear. Stop the government meddling.

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