quote:
if you didn't have inflationary controls price levels would rise uninhibited and banks would be laggards in raising interest rates. Eventually your exports would plummet and labor would be laid off in mass. Price levels would plummet and exports would eventually rise, the problem is capacity would be shaved too highly because of the dramatic swing.

Wouldn't some sort of equilibrium eventually be reached?

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Posted by tigerforever7

Baton Rouge

Member since Aug 2012

1054 posts

Posted on 12/3/12 at 6:09 pm to WikiTiger

Although the value of the dollar is a direct result of consumer activity, so we ultimately control the value of the dollar, I would not trust it right now. The current president is a firm believer in sprending money in a down economic time to create new opportunity and in turn make money. I believe this will hurt the economy further, put us in more debt, and hurt the value of the dollar. just my opinion

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Posted by BennyAndTheInkJets

Middle of a layover

Member since Nov 2010

5612 posts

Posted on 12/3/12 at 6:10 pm to WikiTiger

quote:
Wouldn't some sort of equilibrium eventually be reached?

Re-read the post. The question isn't reaching equilibrium, its how many standard deviation moves happen between reaching the equilibrium. Those large movements hurt, read the mathematical example and then think from a business owner's perspective. If you can count on a single digit, constant growth rate every year they will have confidence in hiring and be able to sleep better. If you have no idea if your business will quintuple sales or lose half of your customer base from quarter to quarter you will be more uncertain with deploying capital.

Confidence and fear are both self-fulfilling prophecies in the market, the central bank is used as a tool to smooth animal spirits to get to your less volatile environment.

This post was edited on 12/3/12 at 6:11 pm

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