Wednesday, March 17, 2010

HEADLINE: Stocks climb after Fed pledges to hold rates low

The Fed won't be tight'ning its grip, and prices go up. That's inflation, isn't it?

I was gonna title this post Same old same-old... Same old economic policy. Same old go-ahead-and-borrow-more, go-ahead, go-ahead, GOTCHA! Same old we encourage you to increase your reliance on credit until someone yells INFLATION in a crowded theater... and then they jack up interest rates.

Wrong, wrong, wrong.

Don't jack up interest rates to fight inflation. Fight inflation by paying off debt a little faster. Fight inflation by removing the money that threatens to cause inflation, the money that's been created by borrowing. Fight inflation by completing more of those credit-use transactions. Fight inflation by reducing debt.

Fight inflation by reducing debt. Tax policy can do the deed. And keep interest rates low to encourage growth. This is Arthurian economics.

Here's the link to the news clip.

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