Crime Against Humanity: Pensée Unique in Economics, 45

Furthermore, with his breakthrough of separating productive and speculative sides of both economy and credit creation, Werner provides us with an interesting countercheck as well; interesting in itself, and interesting in its implications.
The subject is the rise and fall of speculative bubbles, and the ensuing banking crises dragging the rest of us down with them. The proving ground is the boom and bust of Japanese land prices and foreign investments during the 1980s and the early 1990s.
Once productive and speculative sides are separated, their respective inner workings, now visible, can both be studied; and the study of the speculative side brought to light that, just as what makes the organism thrive or wither is but one thing, what makes the parasite thrive or wither as well is but the same thing: the lymph called purchasing power.
For the title of real cause of speculative booms and busts Werner subjected many contenders to an objective inspection of their trends compared to that of the Japanese boom and bust cycle. The contenders were changes in: central bank money supply, domestic and foreign interest rates, exchange rates, bond holdings, fiscal stimulation and credit creation.
The empirical data of statistics showed correlation to the boom and bust, as well as direction of causation from it to the boom and bust, for only one contender, credit creation, and no correlation whatsoever for any other contender.

This is not only conclusive. This has a number of deep implications, too.

That only purchasing power makes the economy either thrive or wither implies that, lacking that, all other “tools” are ineffective, useless, if not harmful. So why do some insist on them?

Crime Against Humanity: Pensée Unique in Economics