Tuesday, May 5, 2009


This is from Professor Thoma's site, Economist's View ...

Are we headed for a bout of inflation like we saw in the 1970s? Political economist Allan H. Meltzer seems to think so, as he points out in this NY Times' piece"Inflation Nation."

If President Obama and the Fed continue down their current path, we could see a repeat of those dreadful inflationary years.
As evidence that the United States is heading for an inflationary wall Professor Meltzer offers the following.

Besides, no country facing enormous budget deficits, rapid growth in the money supply and the prospect of a sustained currency devaluation as we are has ever experienced deflation. These factors are harbingers of inflation.
Paul Krugman refers to this ...

There's a few more exchanges but, it would appear, Krugman wins this one. If you want to understand why Japan didn't experience inflation after pumping tons of money into the economy (and how it could work out this way for the U.S.) see Krugman's book, The Return of Depression Economics

- Mark

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