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Saturday, May 19, 2012

Inflation can be good

The libertarian conspiracy has used all of its formidable propaganda resources to insure that the Unites States does not institute the only measures which can save us from economic disaster. One such measure is inflation -- a controlled inflation.

Ian Welsh's post on the "Dutch disease" set me to thinking, once again, about the vast possibilities offered by inflation. If the dollar were worth less, foreigners would want to purchase more American goods. Those impossible-to-repay home loans would become very-possible-to-repay home loans. Paying back China becomes much less painful. Newly printed dollars -- and I would argue that a controlled inflation should take the form of actual, physical cash -- could be used to provide jobs to the unemployed and homes to the homeless.

It's also true that ultra-low interest rates helped to create the financial crisis in the first place. Paul Krugman once uttered a very simple truism:
Deflation redistributes wealth from debtors to creditors.
Whenever anyone speaks of the virtues of a controlled inflation, the fearmongers bring up the specter of Weimar, of hyperflation. But hyperinflation is a very different animal, with differing causes.

Inflation can be good. And for precisely that reason, the right-wing press has expended a great deal of energy trying to convince the populace that the greatest menace facing this country was and is inflation. As we've noted in previous posts, Fox News heavily pushed the nonsense spewed by a group called the National Inflation Association -- run by pump and dump stock scammer Jonathan Lebed. Lebed's gang tried to convince the populace that onions would soon cost about fifteen bucks.

Absurd.

Inflation cannot be said to exist unless wages and home prices go up. Is that happening? True, some commodities have risen in price, due, in large part, to the shark-like shenanigans of Wall Street speculators. But inflation is a wage-price spiral; if your wages aren't on the increase, your economic problems require another label.

I can only repeat the words I wrote last year:
I suspect that the people screeching about hyperinflation want this country to collapse. They want Apocalypse Now. These people have a vision: They want to replace our current system with their proposed libertarian paradise. You can't build a New Jerusalem without first whipping up a proper Armageddon.
Comments:
It would mean that the debt that Wall Street holds would be worth less than it is now. As if they would let that happen. I'm sure their lobbyists are visiting Obama, Pelosi, Reid and every republican they can bearing gifts.

Both political parties are alike except on of them is bat-shit crazy.
 
I think inflation causes all of those variable interest rate agreements to begin to rise, meaning the buying power of those in debt would be destroyed.

First, let people pay their way out of debt by removing interest rate charges on anyone who can pay down their debt, then we'll talk.
 
You really want me to give you an economic lecture?

(sigh)

A little inflation is okay. It gives the economy some juice. You don't want to do so much that it causes inflation expectations. That creates behavioral responses that ar very very bad. Look up the Taylor Rule. That's what the FED uses now. They actually have an acceptable level of inflation.
 
I believe that the only way out of a generational deflationary episode is uncontrolled inflation. Controlled inflation will merely mitigate the damage that slow debt deflation would otherwise do. It will not reboot the system.

Inflation or deflation. Both benefit or damage different interest groups. Workers vs rentiers.

Lets not pretend that economics is a technical discipline free of politics of ideology.

Harry
 
Jeez, Harry. And Kat thought *I* was off the wall.
 
I don't trust ANYBODY who just ignores that there are between 10 million to 50 million americans who could probably pay their way out of debt if interest rate charges were suspended for anyone who agreed to pay down their debts.

To imply that inflation, with the accompanying increase in home mortgage interest rates, would be a good thing to the middle class that already got screwed over by a bank bailout that never made it to main street, is astounding.

wow.
 
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