US Economy

The current monetary policy of the US authorities is not absolutely adequate to the situation, and the main point that proves it is the fact that the way it explains the world crisis, does not reflect the reality.
Generally speaking, the monetary methods of the world crisis' explanation are "true" only in quite a narrow range of parameters which simply are absent today. Moreover, we may not expect the shift of the situation to these parameters neither in short-term, nor in long-term perspective. Today seems to be the time of 'sophistication'.


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To find it to be true we'll remember the recent speech of Charles Evans, the head of Chicago FRS department, at the annual conference devoted to questions of the current monetary policy. According to his opinion, the USA economy now faced the situation when a number of certain monetary control levers, including the Rate, have now ceased to work. This is true, but then he offered to fix economy with the ordinary monetary measures what as we can see now is not effective and will not counter problems of unemployment and low inflation.
The world crisis's main reason is obvious: no market expansion is possible any more, and the main stimulus to the economic growth now is the all-time decreasing cost of credit money. But it is economy not math and this rate can not be less than zero. The first is to limit the supply of money (this way will cause recession), but then the so-expected growth will occur. But such approach does not suit the monetarists. They could not predict the crisis, then they rejected the crisis, now they imitate activity countering it.
The second way is what Evans said "more liberal policy".
The chief executive of the Boston Federal Reserve Bank, Eric Rosengren, assumed the possibility US economy faces deflation. He said we need to counter it "immediately and vigorously", not to go the way Japan did in 80s when the country within a decade faced deflation.
This fear is natural, because the 8 months of 2010 showed only 1,1% inflation rate and it went along with unemployment growth and decrease of economic activity index. The FRS chairman Ben Bernanke had already mentioned that the only way to reach 2% inflation is printing more dollars.
But why not to have deflation for some certain period of time, then decrease of economy, then again the steady phase of economic growth? Neither they explain this nor how inflation will help the US economy.
The deflation scenario means quick decrease in economy, decay of the current financial system (which had produced all the monetarists). The inflation scenario means the death of 'real sector' of economy that goes along with slow and long period of recession. The monetarists have no idea of what to do but are eager to show they control the situation.

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