Monday, January 26, 2015

Europe's Move in the Direction of More Monetary Mischief

Richard Ebeling emails:

Dear Bob,

I have a new article on the news and commentary website, “EpicTimes,” on “Europe’s Move in the Direction of More Monetary Mischief.”

The European Central Bank announced last week that it will soon start it own version of “quantitative easing,” and increase the quantity of Euros by over $1 trillion dollars over the next year and a half, under the rationale that it must prevent price deflation and “stimulate” growth and employment within the Euro currency zone.

Both purposes are based on false premises. In a free market, price deflation often accompanies economic improvement, as profit-oriented cost-efficiencies are introduced into production to enable more, better and lower priced goods to come on the market.

Europe’s sluggish growth and high unemployment rates primarily have their origins in government regulations that strangle business, taxes that reduce the financial incentives and ability for investment, and labor market rigidities and wage demands that price potential workers out of the market.

Rather than overcoming the consequences of Europe’s interventionist-welfare states, the European Central Bank’s new monetary binge will only succeed in setting the stage for another future economic downturn. Monetary expansion and interest rate manipulations by central banks only succeed in generating a misdirection of investment, labor and resource use, as well as imbalances between market supplies and demands – all of which necessitate painful readjustments when the “quantitative easing” episode comes to an end.

Eliminating business regulations and labor market restrictions, and lowering personal and corporate taxes will bring economic recovery and jobs to Europe, not more monetary mischief by the Euro zone’s monetary central planners.


1 comment:

  1. >Both purposes are based on false premises.

    Another possible false premise is that the officials involved care more about the general welfare than they do for their own graft and corruption income opportunities.