"Deflating the Deflation Myth"

In the interest of laying my cards out on the table, I’ll admit that I am a fan, follower, and students of the Austrian School of Economics.  One of the most prominent figures of the Austrian School is Ludwig von Mises, an Austrian-born Jewish economist who fled Europe in 1940 for fear of a Nazi takeover.  Mises was bold as well as prolific in his economic and philosophical writing.  Here are a couple of quotes: 

“All this talk: the state should do this or that, ultimately means: the police should force consumers to behave otherwise than they would behave spontaneously.”

“Credit expansion can bring about a temporary boom. But such a fictitious prosperity must end in a general depression of trade, a slump.”

“The criterion of truth is that it works even if nobody is prepared to acknowledge it.”

The Man:  Ludwig von Mises (photo courtesy of The Mises Institute)

The Mises Institute was founded in 1982 by Lew Rockwell, Jr., Burton Blumert and Murray Rothbard.  On the Institute’s website, you can find literally tons of interesting articles on almost any political, economic, or philosophical theory or idea out there.  After last week’s post about deflation, I did a little digging on Mises.org and found this thought-provoking article (below) by Christopher P. Casey.  What’s most intriguing to me about last week’s post is that I’m not entirely sure where Mark Dotzour stands with respect to the Federal Reserve.  I couldn’t tell if he was looking to The Fed as a solution to our problems or pointing to it as the root cause.  The Casey article below, as you will find, leaves no room for confusion.  

The only thing I’m confused about is whether Casey’s article from April of last year “picks up” where Dotzour’s left off or if it is an all-out objection to it.  Decide for yourself!
Deflating the Deflation Myth
by Christopher Casey

The fear of deflation serves as the theoretical justification of every inflationary action taken by the Federal Reserve and central banks around the world. It is why the Federal Reserve targets a price inflation rate of 2 percent, and not 0 percent. It is in large part why the Federal Reserve has more than quadrupled the money supply since August 2008. And it is, remarkably, a great myth, for there is nothing inherently dangerous or damaging about deflation.  Read the rest here!

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