Inflation, from Russ Sears

February 1, 2015 |

Inflation or deflation spending has more to do with risk taking than we think. Beyond the filled holes or broken windows and useless buildings, it discourages risk taking businesses. Subcontract with the Government is safe and discourages taking risk on businesses that might fail.

In the past the risk adverse old age savers put money in the banks and pooled their funds to get those who were willing to take risk and had the know how and quantity of scale to invest efficiently with diversified risk taking putting that money back into the economy. The problem right now with deflation and QE is that the government is basically paying banks to deleverage, hence as the boomers become less risk adverse and stuff money into banks and safe investments. Those receiving the "savings" are being discouraged to take any real risk with it and told to leave it in Fannie and Freddie, now really government institutions with a very thin glass wall between them.. Instead of quantity of scale and diversified risk taking knowledge, now you have quantity of To Big to Fail and government insiders.

So basically you have those risk adverse savers giving money to risk adverse bankers with "connections" BUT no real expertise or incentive to take risk with it.


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