I can't tell if you're being sarcastic, but the Fed has three mandates [1], one of which is to stabilize prices:
"maximum employment, stable prices, and moderate long-term interest rates."
Poster's statement is along the lines of "Given that the entire point of firefighters is to promote fires".
It's nonsense.
The problem with the FED, and every Keynesian economist is that they think the US will indefinitely be the world currency reserve, and that 5,000 years of gold based monetary policy is less stable than the post war economics that have given us rising inequality, lowering employment, indefinite QE, China calling for a de-Americanized world, and an interest rate ceiling of 1% (look it up, Bernanke said it!) that was the bottom rate of Greenspan.
I just love when current economists tell me I'm naive, and that government debt isn't the same a debt debt... Or that there isn't a borrowing limit. The limit, is when other governments stop buying your currency. See China-Australia trading deal, China's ease on buying bonds, and look up an interesting theory on how Japan will soon stop buying US bonds, due to it's self-inflicted inflationary policy, which will force it do invest in it's own money supply soon.
Check out this article on mobilization and money: http://neweconomicperspectives.org/2013/08/mobilization-and-... no other governments buying our bonds were needed. Nor are they needed now.
As for replacing the US dollar with something else as world currency reserve, Mike Norman gives his views: http://www.youtube.com/watch?v=m5fTV4bGO0w
I'd recommend checking this video out: http://www.youtube.com/watch?v=BH9YPtk5VB4. This is what many people think. While some can definitely brush it off, many aren't.
If I recall correctly 40% of US currency is actually outside the country.
The only time you don't want low interest rates is when an excessive amount of loans fuels demand-pull inflation. (Though, interestingly, high interest rates can also fuel inflation via wealth effects. Overall, I tend to think interest rates are the wrong lever, and fiscal policy should be used at all times, but that's a whole other can of issues.)
So the behavior is describe is exactly what is reasonable.
Now, the whole QE thing is obviously pushing on a string. The zero lower bound means it's not going to help economic activity. QE is like going to a witch doctor because all the people who could really help - in this case, the people in control of fiscal policy - can't get their heads out of their proverbial asses.
There is huge debate about what inflation should be, and all you can say is "all the bad guys like inflation". The argument for inflation is very old, and goes back to Milton Friedman at least (who was no Keynesian).
The argument for inflation goes back much further than Friedman. Emperor Diocletian tried it and failed. Despots throughout history have attempted it as well and failed (eventually). Inflation "works" in the short term but eventually you pay the price for it in the form of a bust.
I guess that the bad guys liking something isn't entirely sufficient but it should be fairly damning evidence.
If your definition of property is US fiat currency, then OK, but if you're concerned about it, you have options such as commodities, non-US currencies, and hard assets like real estate.
True, except that buying and selling of these is taxed. If the govt. had said, "buy and sell as much glass as you want, and you won't get taxed for its trade", I's switch to glass in a heartbeat.
Of course it's destructive to the average person / taxpayer, but who cares about them? Nobody does who's in charge, that's for sure.
Inflation is, more than anything else, a tax on cash (and last time I checked, your average person didn't have a whole lot of cash on hand). Practically speaking, it helps debtors at the expense of creditors by shrinking the value of liabilities on the books.
The debt hysteria we see isn't because the elite don't care enough about inflation - it's because the costs of it fall more heavily on those who write big checks to political campaigns.
Inflation makes the past matter less. It erodes both the wealth of the super-rich and the debt of everyone else (the farmers who had to mortgage their farms in 1896; the normal family now who has a home mortgage as the norm). That's very attractive to a lot of people, not just those managing the national debt.
A major reason to manage for low, consistent inflation is to train people to put their money into real assets.
In the current market they rise at random rates across sectors. Currently we have people spending a lot of time figuring out how to pay for medical care and higher education because that's where the inflation has hit the hardest.
That's also because of the American Government's idiotic policies on those two "items", in my opinion.
[citation needed]
If we take the far-right Austrian definition of "free market" (meaning: a market in which the only functions of government are property and contract enforcement) then we have zero empirical evidence for much anything about free markets.
They've never existed.
Further, we don't even have solid evidence that hypothetical markets of that kind would be Pareto-optimal. They serve literally no function except that of ideology.
No, that's not what they do. Too much inflation is bad, but you need a little bit. So they seek to maintain a "healthy" amount of inflation. Typically around the world this is something like 2-3%.
Eg: political changes, supply and demand, changes to the definition of the service. i.e. Imagine the difference in what treatments are covered by healthcare today as opposed to say 25 years ago.
Don't forget the "new money" also finds a home through population increases and export of actual money (black and white market).
An ounce of gold was $21 in 1920 and $1410 in 2010. http://www.wisegeek.com/what-is-the-historical-price-of-gold...
Only, the act of printing more money. deepens the problem of your currency losing value. The US thinks it's impervious to inflation, but many including myself see it simply postponing the inflationary event, which will most likely coincide with a currency crisis.
That is like saying that if you run a lemonade stand and someone else opens a lemonade stand next to you, they stole from you. A reduction in the value of what you own is not theft by any stretch of the word.
"It's historically been very popular as a means of taxing the public without them realizing that's what you're doing."
Ah, but inflation is not truly a tax, because it is driven by market forces and not by the law. Actual taxes reduce the rate of inflation by increasing demand for money.
Inflation can't continue in a free market forever because eventually a crash occurs because inflation kicks off a boom bust cycle. Taxes have nothing to do with inflation and don't change anything on their own. They may reduce the pool of capital and may force people to the credit markets but we need more information before saying such a connection exists.
For most people, a reduction in the market value of their job or house makes more difference than the market value of their cash per se. Hence the need to keep an eye on the composition of inflation, as some parts may be going up and down more than others.
Property is theft. If we're going to be ideological, I'm throwing my Marxism into the ring, too!
The whole problem is that inflation is theft. You are basically having your property taken out from under you without realizing it. It's historically been very popular as a means of taxing the public without them realizing that's what you're doing.
This probably not the space to get into all this but reading "The Creature From Jekyll Island" is a good start. That the major players in the banking industry got together in secret to write the Federal Reserve Act suggests who the system really benefits.