Tuesday, December 16, 2008

Recession Economics

When times are tight and money isn't a-flowing from your wallet, would you prefer that your dollar had greater purchasing power, or weaker? Would you prefer that your cost of living increased, or decreased?

With the economic in the tank, government intervention is seen by many as the best way to revive it. One person held as a hero to many for economic turnaround is FDR. One of the tools FDR used to try to revive the economy was inflation. One of the hallmarks of the prosperity of the 1990's under the Clinton Administration and Alan Greenspan's Fed was the very low rate of inflation.

These endless bailouts are going to generate inflation, whether that is the design or not, because the money being doled out doesn't exist. It has to be printed or borrowed, and with our borrowing capacity nearly tapped, it's going to have to be printed- created out of thin air.

Obama is in favor of the bailouts, so by extension, he is in favor of inflation.

Here's an interesting bit of propaganda from 1933, extolling the virtues of inflation, i.e.: the weakening of your purchasing power and the raising of your cost of living.

(h/t: Chris Spangle)

1 comment:

Al said...

Holy crap! That video was dumbfounding. Inflation is great! It'll save us all!

There was one point of explanation where I particularly was ready to stop the presses. See, as inflation kicks in, the purchasing power of the dollar goes down and the cost of living goes up - therefore wages rise to meet them. Oh, well yeah, that automatically follows, doesn't it?

Then the other main specific point of how inflation revives the economy is that it motivates people to buy stuff NOW before the prices go up or up even more. That was the biggest part of the ten minute video was tracing how that works out so good for everyone.

But that's just so dumb on the face of it that I find it hard to believe that uneducated Okie dustbowl farmers wouldn't have seen through that. I suppose it COULD have an effect of causing buying for about a minute - then the inflation kicks in and you can't afford to buy anything and all those steel mills etc have a quick last bump in sales before business shuts down altogether and they're ALL on the soup line.