General Discussion
Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsInflation versus the Alternatives
Compare the period 1975-1980 and the period 2008-2013.
Having lived through both, 1975-1980 was better for ordinary people. Not great... stagflation was a bad thing. But better than what we've got.
2008-2013 has, however, been a fantastic period for the 1%.
That is inflation in modern American economies in a nutshell. The rich crave low inflation.
Everything has winners and losers, including 20% interest rates and 0% interest rates. Winners and losers.
Yet we have been "educated" to think of inflation as a calamity... a cancerous economic illness with no winners. Even though inflation, at heart, is rather correlative with population growth and any modern economy seizes up and stops without at least enough inflation to create the money to service the interest on aggregate debt.
To say inflaton is bad is like saying blood pressure is bad. Try living without it.
20% inflation is pathological. 0% inflation is also pathological. And cancer and influenza are both pathological... but it's easy to pick one.
To repair our national economy we should be running at somewhere around 4% inflation. I'd say 5% because all corrective needs since 2007 have been underestimated, but 4% is fine. Even 3% if it was a reliable floor for a few years.
But oh noes!! The terrible risk. If we let inflation out of the bottle (i.e., full employment) it will eat us all!
Bullshit. 4% would be conservative, but let's say 4%. Okay, what is the risk if we over-shoot?
Average people who are not sitting on vast stores of cash (and are probably carrying some debt) would benefit more from a world with 8% inflation than a world with 0% inflation.
LABOR is a commodity, the same as gold or oil. It is the only thing workers have... the commodity of thir future labor. They don't have cash, but they have their lives to sell. Their future output. A world where commodities are increasing in value and cash is decreasing in value favors labor, relatively.
Banks and money hoarders would be badly hurt by 8% inflation, and make large profits at 0% inflation.
There are winners and losers. One has but to pick a side.
I side with the 90%+. Ending high unemployment is, indeed, inflationary. It is. But there are worse things than inflation and persistant high unemployment is one of them.
Democrats_win
(6,539 posts)A recent edition of The Economist magazine called for modest inflation. Several years ago, Paul Krugman called for more inflation. See, the rich people are parking their money in bank accounts that earn almost no interest rather than risk it in the real economy. If we had inflation, that money would loose value just sitting there, so they would instead take it out and really put it to work. That's just one benefit of inflation--it would force the rich to invest some of their trillions of dollars.
The biggest problem in our economy is that the rich are not spending their trillions. Money is like fertilizer: to do any good, you've got to spread it around, encouraging young things to grow.
cthulu2016
(10,960 posts)Low interest rates are usually enough to induce economic activity, but interest rates are relative. "Low" rates in a morbidly low-inflation environment (like the last 5 years) are not attractive.
For hoarded cash, the "use it or lose it" reality of inflation shifts the incentives toward productive investment.