Durk Pearson & Sandy Shaw’s®
Life Extension NewsTM
Volume 16 No. 2 • February 2013


In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate, it appears simultaneously with its cause; IT IS SEEN. The other effects emerge only subsequently; THEY ARE NOT SEEN; we are fortunate if we FORESEE them.

... it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil.

— From an essay by Frederic Bastiat in 1850,
“That Which is Seen and That Which is Unseen”

Ultra Easy Monetary Policy and the Law of Unintended Consequences

Stimulative monetary policies are commonly referred to as “Keynesian.” However it is important to note that Keynes himself was not convinced of the effectiveness of easy money in restoring real growth in the face of a Deep Slump. This is one of the principal insights of the General Theory.

... the Austrian school of [economic] thought, spearheaded by von Mises and Hayek, warned that credit driven expansions would eventually lead to a costly misallocation of real resources (‘malinvestments’) that would end in crisis. Based on his experience during the Japanese crisis of the 1990’s, Koo (2003) pointed out that an overhang of corporate investment and corporate debt could also lead to the same result (‘a balance sheet recession’).

— William R. White,
currently the chairman of the
Economic Development and Review Committee at the OECD in Paris
(http://dallasfed.org/assets/documents/institute/wpapers/2012/0126.pdf)

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