{"id":14847,"date":"2015-11-27T13:29:48","date_gmt":"2015-11-27T18:29:48","guid":{"rendered":"http:\/\/olduvai.ca\/?p=14847"},"modified":"2015-11-27T13:29:48","modified_gmt":"2015-11-27T18:29:48","slug":"salting-the-economy-to-death","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=14847","title":{"rendered":"Salting the Economy to Death"},"content":{"rendered":"

Salting the Economy to Death<\/a><\/h3>\n
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One popular delusion that won\u2019t seem to go away is the notion that policy makers can stimulate robust economic growth by setting interest rates artificially low.\u00a0 The general theory is that cheap credit compels individuals and businesses to borrow more and consume more.\u00a0 Before you know it, the good times are here again.<\/p>\n

Profits increase.\u00a0 Jobs are created.\u00a0 Wages rise.\u00a0 A new cycle of expansion takes root.\u00a0 These are the supposed benefits to an economy that central bankers can impart with just a little extra liquidity.\u00a0 Unfortunately, this policy antidote doesn\u2019t always work out in practice.<\/p>\n

Certainly cheap credit can have a stimulative influence on an economy with moderate debt levels.\u00a0 But once an economy has reached total debt saturation, where new debt fails to produce new growth, the cheap credit trick no longer works to stimulate the economy.\u00a0 In fact, the additional credit, and its counterpart debt, actually strangles future growth.<\/p>\n

Present monetary policy has landed the economy at the unfavorable place where more and more digital monetary credits are needed each month just to stand still.\u00a0 After seven years of ZIRP, financial markets have been distorted to the point where a zero bound federal funds rate has become restrictive.<\/span>\u00a0 At the same time, applications of additional debt only serve to further the economy\u2019s ultimate demise.<\/p>\n

The fundamental fact is that the current financial and economic paradigm, characterized by heavy handed Federal Reserve intervention into credit markets, is dying.\u00a0 Debt based stimulus is both sustaining and killing the economy at the same time.<\/p>\n

No doubt, this is a strange situation that has developed.\u00a0 For further instruction, let\u2019s look to California\u2019s San Joaquin Valley\u2026<\/p>\n

The World\u2019s Richest Agricultural Valley<\/strong><\/p>\n

Dropping down the backside of the grapevine from the Tejon Pass, along Interstate 5 between Los Angeles and San Francisco, one is greeted by an endless sea of agricultural fields.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Salting the Economy to Death One popular delusion that won\u2019t seem to go away is the notion that policy makers can stimulate robust economic growth by setting interest rates artificially low.\u00a0 The general theory is that cheap credit compels individuals and businesses to borrow more and consume more.\u00a0 Before you know it, the good times […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2,4],"tags":[240,303,305,4844,3699,487,1536,866,1939],"class_list":["post-14847","post","type-post","status-publish","format-standard","hentry","category-economics","category-environment","tag-economic-growth","tag-fed","tag-federal-reserve","tag-fertilizer","tag-irrigation","tag-liquidity","tag-soil-fertility","tag-water","tag-zirp"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/14847","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=14847"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/14847\/revisions"}],"predecessor-version":[{"id":14848,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/14847\/revisions\/14848"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=14847"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=14847"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=14847"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}