Wednesday, February 13, 2013

Panglossian Economics

A student passed along this article to me. I was intrigued by a few things economics professor Michael Smitka had to say.

"There is no chance whatsoever that hyperinflation will happen in the United States," he said. "Only countries that are on the brink of a complete political breakdown ever face this."

Um.

"The Federal Reserve in Richmond has multiple billions in cash reserves that can be infused into the Virginia economy if needed."

Infusing "multiple billions" into the economy isn't inflationary?

"I'd fear the competence of a state-level monetary board and state-level financial regulation more than the federal level."

What's to be feared is a monopoly of regulation and a monopoly board. Competing states introduce market discipline. A monopoly rules by political expediency. Hyperinflation comes when a government exhausts its traditional streams of revenue and reverts to money creation. If Smitka is so convinced we are not approaching such a moment, what is his explanation for why the White House took several days last month before speaking out against coin seigniorage debt solutions?

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