Economist Frank Shostak explains here why the Federal Reserve is just making matters worse.
The key lesson: “real savings are diverted to bubble activities from wealth-generating activities by means of loose monetary policy.”
Inflation, as the Austrians have been saying for many decades, inevitably leads to economic distortions. Those bad investments will eventually collapse and the resulting recession or depression is the market’s way of getting back to normal. Bernanke evidently thinks that yet more loose money will cure the symptoms as well as the underlying disease, but Shostak (and many other economists) believe that he is going to “plunge the economy into a severe and prolonged crisis.”
