Economist Frank Shostak offers these insights as to how an economy comes to be saddled with massive malinvestments (EV plants come to mind) which must eventually be liquidated in a painful recession.
Whenever a central bank tampers with financial markets and manipulates the market interest rates this falsifies individuals’ “instructions” to businesses. As a result, businesses invest in the wrong infrastructure (i.e., not in line with individuals’ priorities). This ultimately undermines the process of wealth generation.
For instance, the central bank lowers the market interest rates while individuals have not lowered their time preferences. This means that people have not increased the supply of real savings. Businesses, however, attempt to increase investments in response to the central bank artificially lowering the interest rates. This will fail since there are not enough real savings to fund the buildup of the capital structure at that time.
EV plants???
No way. Can’t be! After all, Ontario’s true blue Conservative, blubber douggie, “invested” billions of our dollars into EV crap.
So I take it you will be voting for Stiles or Crombie in the next Ontario provincial election.
No. I was thinking maybe the Communist Party. At least they don’t pretend to be something they aren’t.
I’ve done that a couple times when the candidate for the nominally “conservative party” is worse than the marxist-leninist
The Rhinoceros party platform is starting to be the least outlandish.
Well… there are always alternatives…
https://en.wikipedia.org/wiki/List_of_political_parties_in_Ontario
Not sure, though, if any of these choices are practical.
Nowadays I just vote for honesty. That list is very short.
There is a list????
I don’t think the central bank is to blame for stupid investment decisions. That falls on businesses themselves, especially businesses that swallow the government line as to ‘government knows best’.
Re stupid business decisions: the executives who make these decisions get extravagant bonuses, so from their perspective they were good decisions.
Many executives know that governments will bail out companies that make bad decisions.
Politicians know they can find post political employment as consultants and/or lobbyists, with the resulting lucrative earnings. So from their perspective they made good decisions.
Who pays? Guess.
Look for a lot of fires to pop up. EV’s have the built in arson opportunity due to the perceived instability of the cell batteries. GM had a big fire in their main EV Luxury vehicle plant a couple months ago. Rivian Automotive had a major fire break out in their plant just two days ago. Both companies are scaling down EV’s.
IOW, Insurance and Re-Insurance companies are not a sound investment at present.
Andrew Jackson was onto something..at least regarding banking
Frank Shostak must be another Keynesian fool. Central banks pretend to set interest rates, but they are actually set by the bond market, which dwarfs central bank power. The bond markets in the western world have been rallying, because the smart money knows the recession is already underway, unemployment will double over the next year. Relative ‘safety” and liquidity are the main issues now, thus the run up in bonds.
“Build a better mousetrap, and the world will beat a path to your door.”
…at this point, we’re gonna need claymores.
And the douchbags that created this garbage will not suffer one bit. The house of cards will collapse one day, and I’m hoping the D bags are in it
Queue the bulldozers.
“Whenever a central bank tampers with financial markets…”
That is the main function of central banks.
Central banks are a supra-national enemy that have been used to enslave humanity since before any of our great-grandparents were born.
Central banks must be ended.
https://archive.org/details/church-state-g-edward-griffin-the-creature-from-jekyll-island
More than a hundred years ago Henry Ford documented in detail the evil of central banks.
https://archive.org/details/FordHenryTheInternationalJewTheWorldsForemostProblemEN2003496P.