If the answer is to increase inflation, you’re probably asking the wrong question. That is my opinion and it is also the opinion of syndicated economist Robert Samuelson. One of the curious points here, however, is that I believe that we are already having inflation because inflation simply means an increase in the money supply.
Samuelson implies in his article that he means the actual increase of prices that usually results from inflation. Of course, with our current weak economy, the prices of many goods is not increasing, thus leading some to believe that inflation is not happening.
The “fact” that prices are not increasing according to the government data has led some to argue that inflation would be a good thing. True, rising prices would be a sign that the economy is growing, but it would be a result of growth. Inflating the money supply has certainly not led to economic growth.
In other words, while I quibble with Samuelson about definitions, he is basically correct. Inflation is not going to help the economy.
2 Replies to “Inflation is not the answer”
Why are rising prices a sign of a growing economy Paul?
Well, the money is out there because it has been printed/created. If demand picks up (not likely anytime soon), we’ll see the result in prices. Right now it seems that the main result of the Fed’s money printing has come in the form of the falling price of the dollar. Am I wrong?