In response to my post last Thursday on the Fed’s signaling the possibility of more quantitative easing (QE), a commentator using the pseudonym “Milton Friedman” wrote,

have you checked inflation rates lately? they are at historic lows. if the parade of horribles doesn’t happen, shouldn’t that cause you to reconsider your understanding of the economy? economists have learned quite a few things since 1609…

As I responded on that post, I’m not sure what “parade of horribles” he is referring to; my point was simply that the short term gain of inflationary policy now is not worth risking the likely long term disadvantages and need not be taken as apocalyptic.

Furthermore, as a matter of fact, inflation rates do not appear to be at “historic lows” in 2012, especially given the short bout of deflation we experienced from March to October 2009. I’ll let readers make up their own minds on that point, however, since it really doesn’t affect my argument.

What is far more important to me is pseudo-Friedman’s comment that “economists have learned quite a few things since 1609.” The reference to 1609 is due to the fact that I was highlighting the work of Spanish scholastic Juan de Mariana’s analysis of the effects of inflationary policies in medieval Spain. Is pseudo-Friedman right? Is Mariana’s analysis invalid due to its antiquity? Read more on QE: Haven’t We Learned So Much Since 1609?…

In today’s Wall Street Journal, Jon Hilsenrath and Kristina Peterson report, “The Federal Reserve is heading toward launching a new round of stimulus to buck up the weak economy, but stopped short of doing so right away.” The predicted means of stimulating the economy is another round of the unconventional policy of quantitative easing (QE), i.e. when a central bank purchases financial assets from the private sector with newly created money in effort to spark economic growth. Thus, the quantity of US dollars would be increased, debasing their value and causing inflation.

Read more on The Prospects of More QE for Economic Stimulus: A Lesson from History…

The extent and persistence of the global economic and financial crisis has caused many people to start asking if there is any alternative to the current monetary system of fiat money overseen by central banks which enjoy varying — and apparently diminishing — degrees of independence from politicians who seem unable to resist meddling with monetary policy in pursuit of short-term goals (such as their reelection).

Read more on Gregg on Gold: The Moral Case…