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January 10, 2009

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Shalom Patrick Hamou

Sorry, Chairman Ben S. Bernanke, But Quantitative Easing Won't Work.

In a Liquidity Trap although Saving (S) is abnormally high investment (I) is next to 0.

Hence, the Keynesian paradigm I = S is not verified.

The purpose of Quantitative Easing being to lower the yield on long-term savings and increase liquidity it doesn't create $1 of investment.

In a Liquidity Trap the last thing the Market needs is liquidity.

Quantitative Easing does diminish the yield on long-term US Treasury debt but lowers marginally, if at all, the asked yield on long-term savings.

Those purchases maintain the demand for long-term asset in an unstable equilibrium.

When this desequilibrium resolves the Market turns chaotic.

This and other issues are explored in my tract:

A Specific Application of Employment, Interest and Money
Plea for a New World Economic Order


Abstract:

This tract makes a critical analysis of credit based, free market economy, Capitalism, and proves that its dysfunctions are the result of the existence of credit.

It shows that income / wealth disparity, cause and consequence of credit and of the level of long-term interest-rates, is the first order hidden variable, possibly the only one, of economic development.

It solves most of the puzzles of macro economy: among which Unemployment, Business Cycles, Under Development, Trade Deficits, International Division of Labour, Stagflation, Greenspan Conundrum, Deflation and Keynes' Liquidity Trap...

It shows that no fiscal or monetary policy, including the barbaric Quantitative Easing will get us out of depression.

A Credit Free, Free Market Economy will correct all of those dysfunctions.


The alternative would be, on the long run, to wait for the physical destruction (through war or rust) of most of our productive assets. It will be at a cost none of us can afford to pay.

In This Age of Turbulence People Want an Exit Strategy Out of Credit,

An Adventure in a New World Economic Order.

A Specific Application of Employment, Interest and Money


Press release of my open letter to Chairman Ben S. Bernanke:

Sorry, Chairman Ben S. Bernanke, But Quantitative Easing Won't Work.


Yours Sincerely,

Shalom P. Hamou AKA 'MC Shalom'
Chief Economist - Master Conductor
1776 - Annuit Cœptis.

Ronald Kitching

The collapse of the fiat money system is a natural event, like blood follows a punch on the nose. It has happened since Roman Empire times. In such cases, it is futile to try to extend the fiction, by more of the same. The Prime Minister crowing about his stimulants shows his abysmal ignorance of monetary theory.

The remnants of malinvestments, as a result of the inflation, should be allowed to return to reality, that is, a price the market can support. That includes the wages of workers employed in the various industries. Nobody not even the Union movement is immune.

And, the rush to maintain the fiction of inflation, also endangers capital investments that were otherwise safe. History shows that genuine dividend paying investments are frequently also destroyed, as inflation taxes away their substance.

Elected representatives should know about serious matters like this. If they do not know, what are they doing presenting themselves to the public as wise representatives?

This is a form of fraud, which the Leader of the Opposition is supporting. Something needs to change; even the newspapers are indicating that fact.

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