The Austrians' great concern is that a government-dominated money-supply regime would ultimately lead to economic and therefore political disaster; the objective of price stability would not alter such a dismal prediction. Even if a central bank succeeds in stabilizing a targeted price index, it would — by an ideologically motivated increase in credit and money supply — generously increase credit and money supply. It thereby distorts the economy's price mechanism, promotes malinvestment and initiates subsequent economic downturns...In other words: removing real price signals from the market (or trying to) plays havoc with your markets.
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LINKS: The fateful wish for price stability - Professor Thorstein Pollett
Denying prosperity by misunderstanding inflation - Not PC (Dec, 2005)
More myths about inflation - Not PC (Sept, 2006)
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