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Showing posts from June, 2008

Economics as Ideology

You aren't smarter than the market. It really is that simple. This is a quote from a CNN Money online report on the debate over whether we are faced with inflation: 'president of the Federal Reserve Bank of Cleveland and a voting member this year of the Federal Open Market Committee, explained in a speech last month. "As consumers spend more money for higher-priced petroleum and agricultural goods," she continued, "they eventually have less money to spend on other goods and services. Other relative prices must then fall."'' Well yes, prices are falllng "relative" to oil and food. But this is a clearly a statement of ideology rather than evidence based science. And it is clearly wrong. As people have less to spend, they buy less and producers produce less and lay off employees who now have less to spend, creating stagflation. From that same article: "Automakers Ford ( F , Fortune 500 ) and General Motors ( GM , Fortune 500 ) have slas