News From Terre Haute, Indiana

Business

March 19, 2009

Arthur Foulkes: A free market answer to calls for government ‘stimulus’

Recently, an Indiana State University economics professor wrote a letter published in the Tribune-Star critical of my economic analysis of the current recession. Or, as he put it, what I claim as economic analysis.

My critic used the words “outrageous,” “fallacious,” “ludicrous,” “fundamentalist,” “dogmatic,” “historically inaccurate” and, my favorite, “crackpot” to describe my arguments.

(I wonder how he really feels?)

To refresh some memories, my arguments were that the Federal Reserve , by printing massive quantities of money, especially after the dot-com bubble burst and after 9-11, essentially laid the groundwork for the housing bubble (actually, my critic seems to have overlooked this argument).

I also wrote that Fannie Mae and Freddie Mac, both government-created enterprises, helped subsidize home purchases, further inflating the housing bubble.

My column also stated that the government should keep its hands off the economy. Having gotten us into this mess, neither the Fed nor the rest of Washington are competent to get us out. Rather, the market should be allowed to adjust to reality without new distortions introduced by lawmakers and bureaucrats, I argued.

And, as I’ve done many times in this column, I contended that a free-market money, such as money backed by gold, would be superior to our fiat money system. Our fiat system lends itself to the boom-bust business cycle in general and market-distorting bubbles in particular, I also argued.

As far as my “historical inaccuracies” go, I stated that Japan’s experience in the 1990s with a long recession and America’s Great Depression show that government intervention can prolong, rather than shorten an economic downturn.

Several times in this column I’ve tried to explain why I favor a gold-backed money over Fed management of money supply, so I’ll limit myself to writing that when folks in Washington inject large amounts of new money into the economy, they create important distortions. Most important, interest rates can be badly distorted by these injections, and interest rates – believe it or not – are an important market signal. Government tampering with interest rates is, in effect, no different from tampering with any other market signals. The results are just as bad.

Text Only | Photo Reprints
Business
Latest News
TribStar.com Poll
AP Video
Passengers Abuzz After Plane Hits Swarm of Bees Disbanding Muslim Surveillance Draws Praise Hundreds Missing After South Korean Ferry Sinks Boston Bomb Scare Defendant Appears in Court Raw: Ferry Sinks Off South Korean Coast Pistorius Trial: Adjourned Until May 5 Diaz Gets Physical for New Comedy Raw: Urinator Causes Portland to Flush Reservoir Raw: Pro-Russian Militants Killed on Base Miley Cyrus Still in Hospital, Cancels 2nd Show New York Auto Show Highlights Latest in Car Tech Raw: Fatal Ferry Boat Accident Captain of Sunken South Korean Ferry Apologizes Today in History for April 17th Pope's Relic on Wheels Departs to Rome Raw: Three Rare White Tiger Cubs Debut at Zoo Hoax Bomb Raises Anxiety in Boston Freeze Leaves Florida Panhandle With Dead Trees New York Auto Show Highlights Latest in Car Tech Ex-California City Leader Gets 12 Year Sentence
NDN Video
Grizzly Bears Get Snowy Birthday Party Florida State Ends Top Of the 5th With Bizarre Play vs Jacksonville | ACC Must See Moment Kate Upton Loves Her Body, Every Part Of It Weatherman draws forecast when another technical glitch strikes WGN Elizabeth Olsen's Sexy Shoot Bay Area Teen Gets Prom Date With Help From 'Breaking Bad' Star Boston Bomb Scare Defendant Appears in Court Behind The Tanlines Jersey Strong Part 1 WATCH: Women Fight To Marry Prince Harry! Jenny McCarthy Engaged to "New Kid" Kate and Will Land in Oz O’Reilly Launches Preemptive Strike Against CBS Pixar Unveils Easter Eggs From its Biggest Movies Baby Sloths Squeak for Their Cuddle Partners in Adorable Video Miley Cyrus Hospitalized After Severe Reaction To Medicine Raw: Ferry Sinks Off South Korean Coast Toddler climbs into vending machine 8-year-old Boy Gets His Wish: Fly Like Iron Man Much-Anticipated 'Gone Girl' Trailer Finally Debuts! (VIDEO) Dog and Toddler Wear Matching Outfits in Adorable Photo Series
Parade
Magazine

Click HERE to read all your Parade favorites including Hollywood Wire, Celebrity interviews and photo galleries, Food recipes and cooking tips, Games and lots more.
  • -

     

    March 12, 2010

activity