Every central bank in the Western world is holding interest rates down and printing money like it's going out of style.
Five years ago, nearly every economist in the world would have told you this would cause inflation to skyrocket, and the big deficits governments were running would make matters worse. Yet, inflation has remained rather tame at 2%.
In Friedman's world that just wouldn't be possible. What does it all mean?.... But there is one other economic theory that may relevant here.....
Austrian economists like Ludwig von Mises will tell you that ultra-low interest rates will create an orgy of speculation, in which markets create a huge volume of "malinvestment" - investment that should not economically have been made, and which has less value than its cost.
Eventually-like it did in 1929, the volume of malinvestment becomes so great that a crash occurs, in which all the bad investments have to be written off, huge losses are taken and a wave of bankruptcies sweeps across the economy.
Read more here: http://www.marketoracle.co.uk/Article38756.html
