RE: Deflation.....Excellent find. You know he is right in saying that the solution lies outside of orthodoxy.
You know what I would do I was greenspan, AND I had iron boulders for testicles?
I would raise rates.....and I mean raise them hard up to 10 may be 15%
In the US the big problem is debt right? ergo the government should want to reward savers and encourage debt repayment.
And at 15% people will be very motivated to pay off thier debts. AT 15% money will come rusing into US treasuries and the USD will go up to bubble levels
Comapnies would go bankrupt...just implode taking a lot of excess capacity off line....everybody would be laid off so demand would fall off a cliff....All the while you keep the printing press rolling.
After a year of that....you have pent up demand, low debt, a sky-high dollar. THEN you knock interest rates back to current levels.
Voila....inflation....and since I was in charge all the people on the K board would get the inside scoop of when to sell and buy gold stocks!~!
Of course it would cause quite the bit of human misery and most likely one would be hung off the nearest telephone pole.....hmmm so how about this.
Despite the fact that they are running the presses night and day...defaltion is still getting stronger...why? becasue the money is not getting to the right place.
If the governement gave me a check for $100,000...no strings attached...then trust me I would stimulate the economy and start juicing the stock market...all those essential things I have had to do with out....telescopes, and pool tables and superchargers and italian learther catsuits for the wife.....
aagh but one can't just give money away....
but think of this one....the governemnt goes to the banks and co-ops...and asks how much is needed to pay off every morgage in Canada
they then deliver that amount to the banks...in cash, in big big mother#$ big sacks and pay off each morgage
at the same time you pass legislation that greatly increases the cash reserves that a banks has to have on hand to go against new loans (basically enough to cover the morgage payments)....this of course to keep the banks from just throwing this cash into the system cauing hyperinflation
so now you have millions of homeowners debt free and much improved cash-flow to go out and buy stuff like gold bars and you actually have a much more conservative and well capitalized banking system
creative accoutning sure...but the money never really gets into the systme and the books are squared....everyboyd is happy and you don't have to screw anyone around