May 21, 2009
Harvard Teaching Students Wrong Economics
Harvard professors Gregory Mankiw and Kenneth Rogoff came out this week and said that more inflation is the key to speeding up recovery of the U.S. economy. Gregory Mankiw said he believes the Federal Reserve should work to create negative interest rates and Kenneth Rogoff advocated having a 6% rate of inflation.
It is our belief that any inflation is too much. Inflation does not create wealth, inflation destroys wealth. It is because of the Keynesian economic theories being taught by professors like Gregory Mankiw and Kenneth Rogoff that our country is in the economic crisis it is today.
Keynesian economists believe that government spending can stimulate an economy and artificially low interest rates are the key to getting an economy out of recession. The truth is, government spending and artificially low interest rates got us into the current economic crisis and a larger degree of the same mistakes will only create a much larger crisis down the road.
Unfortunately, most of the clueless politicians in Washington received ivy league educations from institutions like Harvard, and don't understand the difference between Keynesian Economics and real economics. Real economics, otherwise known as Austrian Economics, is an understanding that the free market should be allowed to work for itself.
The free market says the economy is in need of a recession. By trying to prevent a much needed recession, the Keynesians in Washington are inadvertently creating a currency crisis where the U.S. dollar will rapidly lose its purchasing power. Unless the Federal Reserve reverses course immediately, we believe the U.S. economy is ultimately headed for Zimbabwe-style hyperinflation.
Food prices rose by the most in April than in any month in over a year. As evidenced in our latest "quick inflation alert" video from Food4Less in Southern California, in some discount supermarkets it now costs between $3.81 and $4.20 for a loaf of bread and $3.98 for a pound of the cheapest brand of cheese.
For the millions of American families on fixed incomes, the last thing they need is inflation. Many of these families are already spending every penny on necessities like food and energy; even the slightest increase in food and energy prices could be catastrophic.
If rising Real Estate and stock market prices are what Keynesian economists would like to see, they need to realize that with a glut of houses on the market and major corruption in the stock market, the same monetary inflation needed to create a 10% increase in Real Estate and stock market prices, might also create a 100% increase in food and energy prices.
It's a shame that college students waste hundreds of thousands of dollars on ivy league educations that teach the wrong economics. They are graduating with huge debts, no jobs, and no idea of how the economy actually works. At least the hyperinflation they are creating will make it easy for them to pay off their student loans in the future.
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