Thursday, November 04, 2010

The Austrian Concept of Inflationary Fed Policy in a Nutshell

A comment by "Wandarin" on one of Steve Sailer's posts:

"I'm confused by how this QE actually works in actual actuality"

Imagine a large hot-air balloon carrying a bunch of people with a gigantic hole in it. The person in charge of flying the balloon could:

a) Land, fix the hole, then take off again.
b) Keep firing the gas cannister thereby keeping the balloon in the air as long as possible before the gas runs out and the balloon suffers a catastrophic crash.

Now imagine the person in charge of the gas cannister:
a) Is responsible for the hole in the balloon and will be found out if the balloon lands.
b) Has a parachute
c) Gets money for every second the balloon stays in the air.

That is all.

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