{"id":2844,"date":"2014-12-11T16:58:01","date_gmt":"2014-12-11T21:58:01","guid":{"rendered":"http:\/\/olduvai.ca\/?p=2844"},"modified":"2014-12-11T16:58:01","modified_gmt":"2014-12-11T21:58:01","slug":"does-qe-create-deflation","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=2844","title":{"rendered":"Does QE Create \u201cDeflation\u201d? |"},"content":{"rendered":"

Does QE Create \u201cDeflation\u201d? |<\/a>.<\/p>\n

Malinvestment vs. Overinvestment<\/strong><\/h3>\n

Recently we have come across a very interesting\u00a0article by Lee Adler<\/a>, which discusses the connection between the Fed\u2019s money printing activities and the shale oil boom. In this context the possibility is mentioned that QE may actually contribute to \u201ccreating deflation\u201d.<\/p>\n

Obviously, we agree with many, in fact with the vast majority of the points made by Lee Adler in his article. Money printing\u00a0always<\/em>\u00a0diverts investment into lines that later on turn out to be unprofitable, precisely because it distorts relative prices in the economy. Lee Adler should also be commended for drawing attention to the fact that the money relation \u2013 i.e., the purchasing power of money \u2013 depends not only the money side of things, but also on the goods side.<\/p>\n

In an unhampered market economy in which a market-chosen money is employed, it would be reasonable to expect that prices will tend to gently decline over time, as productivity increases will as a rule exceed whatever additions to the money supply occur (for instance, if gold were still used as money, its supply would increase by roughly 1.4% per year and it is a very good bet that economic productivity would be rising at a faster pace).<\/p>\n

Thus, a mild, persistent decline in the prices of most or all goods and services is a hallmark of a progressing economy. Needless to say, anyone who has observed the computer industry in the wider sense over recent decades \u2013 the productivity growth of which has been so large it actually outpaced the effect of money printing on prices \u2013 will realize that no business needs rising consumer prices to thrive, and that consumers do not \u201cpostpone their purchases\u201d due to falling prices. The entire idea that a \u201cdeflationary spiral\u201d could somehow harm the economy is erroneous (however there is a reason why\u00a0today\u2019s<\/em>\u00a0policymakers are afraid of falling prices, which we will briefly discuss below).<\/p>\n

\n

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

Does QE Create \u201cDeflation\u201d? |. Malinvestment vs. Overinvestment Recently we have come across a very interesting\u00a0article by Lee Adler, which discusses the connection between the Fed\u2019s money printing activities and the shale oil boom. In this context the possibility is mentioned that QE may actually contribute to \u201ccreating deflation\u201d. Obviously, we agree with many, in […]<\/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],"tags":[202,426,661,662],"class_list":["post-2844","post","type-post","status-publish","format-standard","hentry","category-economics","tag-deflation","tag-inflation","tag-qe","tag-quantitative-easing"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/2844","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=2844"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/2844\/revisions"}],"predecessor-version":[{"id":2845,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/2844\/revisions\/2845"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2844"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2844"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2844"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}